Whatever Gordon Brown says, we’re headed for a recession. It will be a curse for many people, but a boon for the insolvency practitioners.
As usual, they will prosper while the rest of us suffer. They’re helped to do this by the current regulatory regime and the Insolvency Act 1986.
Contrary to the recommendations of the late Sir Kenneth Cork, it failed to impose any social obligations on the insolvency industry, and although Peter Mandelson is talking of Chapter Eleven protection for businesses, the recession will hit first.
The insolvency market is exclusively preserved for around 1,800 accountants and lawyers who belong to a few select trade associations. Most insolvency work is concentrated in ten major accountancy firms who employ about 50% of all insolvency practitioners. They are regulated by seven recognised professional bodies and by the DTI, with its Nelsonian eye on the Insolvency Service.
The result is obfuscation, feather-duster regulation and the legitimisation of dodgy practices, as a huge crop of complaints and numerous TV and radio programmes have shown.
One of the aims of the Insolvency Act was to outlaw the ‘phoenix syndrome’ by which company directors set up a succession of companies at the expense of unpaid creditors and other stakeholders. Yet the practice is alive and kicking.
Indeed, it is facilitated by insolvency practitioners who meet company directors well before the receivership and devise schemes for selling assets to the management at knockdown prices. The directors get the company. The receivers get hefty fees. The unsecured creditors and other stakeholders get the lemon.
Company directors can be disqualified by the Company Director’s Disqualifications Act 1986. Yet there is no equivalent legislation for dealing with insolvency practitioners. They are protected by their trade associations and complaints to the accountancy bodies are ignored. No justification is ever offered for this constant imitation of the three unwise monkeys. It’s hardly surprising that the insolvency industry is keen on self-regulation. It’s really no regulation.
Austin Mitchell is Labour MP for Great Grimsby
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