Profile: Gareth Hughes, R3 president

It’s not just ships and aeroplanes that disappear in the Bermuda triangle, as the new president of R3 can testify. Gareth Hughes is living proof that insolvency professionals can also fall into its mysterious pull.

Having just been made partner of Arthur Young back in 1988, he was packed off to Bermuda for two years to work on a very large reinsurance insolvency.

At the time, £10m was considered high company debt, but the business in question had liabilities of $1bn (£0.56bn).

‘There are worse places to be seconded,’ he remembers. ‘It’s the most important offshore insurance centre in the world. Although it’s small it’s a very good place for insurance, like the Cayman Islands is for banking.’

His firm, Arthur Young, had become Ernst & Young by the time he ‘escaped’ from Bermuda 24 months later, and he remains with the firm today. After qualifying in audit in 1981, he was seconded into the department for six months as recession began to bite. ‘I’ve never escaped since,’ he says.

For someone who claims to be trapped, Hughes has done rather well. Among the highlights of a career specialising in complex international restructuring assignments, he counts British & Commonwealth Group as one of his cases.

When it collapsed, it incorporated around 700 companies. It was, he says almost modestly, ‘a very large thing’.

Now 47 years old, Hughes seems truly in his element in insolvency. ‘What makes it different and attractive is that you are involved in actively rescuing businesses and companies. You’re making executive decisions in relation to companies you’re handling and their people and products, whereas the rest of the profession in terms of audit and tax are acting in a more advisory way,’ he says.

One advantage of his international focus is travel. He spends large amounts of time in the US and Australia ‘among others’. ‘I have racked up a few air miles,’ he concedes. He even had some ‘minor’ involvement after the collapse of Parmalat, which found him strutting his stuff in Milan.

His abilities have earned him the honour of the presidency of R3, the leading professional association for business recovery, corporate reconstruction, insolvency and turnaround specialists in the UK. He says he will be careful not to repeat the mistakes of one predecessor now he has been handed the presidential medal. ‘We call them gongs. I’m going to try not to lose it because one went missing in a taxi before,’ he says.

The new president is not one for office pranks. ‘My manner is considered, professional and serious because on a day-to-day basis that’s the kind of work I do,’ he says.

It is an attitude that shows itself in the way he plans to tackle two major issues R3 faces – regulation and bankruptcy. Multiple regulation is a running problem for the insolvency profession, and Hughes’ predecessor, John Verrill, conceded his bid to harmonise it had only amounted to a ‘baton’.

Now that it has been passed on, the next step will be a survey of members.

‘With eight regulators for only 1,800 or so licensed IPs, there is a strong case that there should be a single regulator,’ he says. ‘I’m trying to better understand what members want.’

If the survey calls for a single regulator, the considered part of his personality may give way to the serious. ‘Hopefully I wouldn’t upset people, but it would be incumbent upon me to sit down with (the regulators) and have a discussion about this,’ he says.

You wouldn’t guess it from looking at him, but another of his passions is more beach bum than businesslike. ‘I have a holiday home in Cornwall and I spend as much time as I can down there surfing and sailing,’ he says.

The ability to ride a wave will be handy for Hughes since one of his key challenges is the rising tide of consumer debt. A key R3 campaign is for a cheaper version of the regulated profession’s key tool against bankruptcy – the individual voluntary arrangement. The procedure aims to renegotiate debt to a manageable level and is legally binding so it can provide guaranteed long-term protection from creditors. But it is too expensive for many debtors, leaving them in the hands of the unregulated debt management companies.

Hughes says there is a danger of a bankruptcy time-bomb, as those who have taken on debt management arrangements falter in their repayments, only to discover they are still liable for all their debts.

To listen to some members of the profession you might think IPs were priming their guns to go on the offensive against the unregulated sector, which dominates both market and airwaves for those with debt problems.

Hughes takes a more considered line.

‘I wouldn’t want to be shown saying it was a face-off or against DMCs, but we have a concern as a profession to make sure right and appropriate procedures are being used for personal debt problems,’ he says.

R3 has helped to commission research from Michael Green, a research fellow at the School of Business at the University of Wales, to examine the issue.

Hughes says his action will depend on Green’s findings, due in next month.

The research will try to establish the number of people using the unregulated sector, their success rate and the reasons people go bankrupt. ‘A lot of these things get buried,’ he says. ‘There’s no proper evidence of unregulated procedures for people with personal debt difficulties and there may be unscrupulous debt advisers in some corner shops who are charging a fortune and not advising people properly,’ he says.

It’s not just small DMCs that are of concern. ‘There are large companies set up that are funded by the credit card companies. Their interest lies in getting that debt repaid, so their objective would be to get it repaid in full plus also get interest paid.’

Hughes’ outlook on the profession at large is confident. He believes the corporate restructuring side will go ‘from strength to strength’ as the use of the streamlined administration procedure grows.

He also hopes R3 can embody the profession’s shift away from formal insolvency to informal restructuring by growing the membership and profile of its turnaround sister-body, the Society of Turnaround Professionals.

He insists the profession’s ethics are generally ‘very high indeed’.

Many IPs complain about a well-known ‘Mafia’ operating in a particular area of London, but Hughes dismisses this.

R3 has chosen an energetic president. Hughes laments his failure to go to the gym enough and can often be found running by the Thames near his home in Barnes. At times he has gone ‘many months’ without a day off.

By contrast, Hughes believes the profession may be less busy as the economy improves. ‘Things have started to pick up significantly and, while there will still be a real need for restructuring and insolvency advice, we are probably entering into quieter times,’ he says.

But somehow, one gets the impression he will find ways to fill in his time.


With personal debt at record levels, the timing of last month’s introduction by the government of a brand new bankruptcy regime is highly controversial.

The main focus has been on whether the new system represents a ‘debtors’ charter’, a claim hotly contested by the Insolvency Service.

Bankruptcy levels are at an 11-year high – even before the regime comes into effect. After the changes, some believe the numbers will skyrocket.

In this context, a less well-publicised controversy has been raging.

The insolvency profession is frustrated at what it sees as the failure of reforms to give it the tools it needs to help debtors avoid bankruptcy.

Essentially, those faced with debt have three options: declare themselves bankrupt, seek the help of an insolvency practitioner or head for an unregulated debt consolidator.

It is probably an exaggeration to call the new regime ‘soft’. Bankrupts’ assets can be sold off, they can lose their homes and credit ratings suffer.

Some employers, meanwhile, will not employ a bankrupt.

R3 believes these factors – as well as people’s desire to ‘do the right thing’ by creditors – demand an alternative procedure. The regulated profession has the IVA. This agreement with creditors freezes interest and rearranges repayments based on ability to pay. As the agreement is legally binding, any remaining debt is written off.

But the IVA is a costly procedure and the regulated profession believes the government should create a cheaper version to enable them to help those with smaller debts.

This would allow regulated profession to start taking market share from commercial advisers offering debt management agreements.

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