The All-Party Parliamentary Group (APPG) on Fair Business Banking, supported by law firm Humphries Kerstetter LLP, is to conduct an in-depth investigation into standards in the UK insolvency profession.
The APPG on Fair Business Banking is concerned there might be systemic issues with how the corporate insolvency sector is regulated after hearing a number of worrying cases, according to Heather Buchanan, executive director, policy and strategy at the APPG.
“There’s no ombudsman and there’s no real mechanism to challenge which just leads to, from what we’ve seen, very perverse outcomes. And sometimes, we certainly see stuff which a layperson would say looks very wrong,” she says.
With no ombudsman, independent regulator or tribunal service in place, avenues for redress are limited. The only other option is to go through the courts, but this is fraught with difficulty due to the cost and the “high bar” one must overcome to challenge the conduct of an insolvency practitioner as they are considered “officers of the court”, says Buchanan.
“There’s a really high bar to actually challenge their conduct. Notwithstanding the fact that if you’re trying to challenge their conduct and you’re in a position of insolvency, you probably don’t have any money to do it.”
Kevin Hollinrake MP and co-chair of the APPG said in a statement: “A properly functioning insolvency industry is key to any successful economy. In recent years there have been a number of high-profile failures in the insolvency industry. The APPG has also received its fair share of complaints about the system. This is why we thought now would be a good time to conduct our review, identify any failures and suggest practical ways they might be addressed.”
James Russell, partner at Humphries Kerstetter LLP said in a statement that the review was intended to uncover whether cases of misconduct are representative of a systemic problem within the industry.
“All industries have stories of individuals or companies behaving badly. The insolvency profession is no different. But this needs to be put into proper context. As a City law firm, we have seen conduct that falls below what should be expected. What we are interested in exploring is whether such behaviour is indicative of a wider, systemic problem.
“If these problems are endemic, we look forward to working with the APPG to find ways to address them for the benefit of the insolvency industry and the wider economy,” Russell said.
Buchanan adds that the review is necessary due to the tendency of insolvency practitioners (IPs) to close ranks when questioned.
“There’s lots of good IPs out there that I’ve spoken to and they all know there’s a problem in the industry, but nobody will say it,” Buchanan says. “Everybody knows by name the ones that push the limits of things, but it’s such a tight community it becomes more of a club where you protect your own at all costs.”
The APPG has already called for evidence from the major accountancy firms, the regulatory bodies and the Insolvency Service. It is now asking for anyone else with information about conduct and standards in the corporate insolvency world to submit information for consideration in any final report.
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