Insolvency regulation is heading for its biggest shake-up since the 1986 Insolvency Act set out legislation governing insolvency law and practice, according to documents obtained by Accountancy Age.
The Insolvency Service is expected to tell DTI minister Dr Kim Howells next week that an Insolvency Practices Council staffed by a majority of lay members and a minority of insolvency specialists should be established.
The report says the new body – which will operate along similar lines to the regulatory body being mooted for the accountancy profession – is in the public interest.
Ministers are expected to back the proposals which outline a ‘practical and appropriate way in the devising of regulatory standards’.
At present, insolvency practitioners have to be licensed by one of the eight professional bodies, while the Insolvency Practitioners Association and the Society of Practitioners of Insolvency, represent interests of the profession.
Under the new proposals, professional bodies would be required to co-operate with the new council which would take control of standard setting.
The IPA was involved as a member of the report’s working party while the SPI sent observers. Representatives from the Law Society, ACCA, and the English, Scottish and Irish ICAs also contributed of the recommendations.
No members of the IPA or SPI were available for comment, but one working party member said: ‘In the past, the insolvency profession has been very unwelcoming to scrutiny, while it is also very easy to be dishonest and that is a real problem. This report is going the right way.’
The Federation of Small Business also greeted the substance of the report, agreeing that the profession was often seen by its members as a clandestine group.
FSB spokesman David Hands said: ‘A lot of small businesses think that it is a foregone conclusion that when receivers are called in, they are going to be closed down. There needs to be much more openness.’
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