Watchdog to bite practitioners' pockets
Practitioners face huge bill after government refuses to fund new insolvency watchdog.
Insolvency practitioners may be forced to pick up a bill running to hundreds of thousands of pounds after the government refused to cover the costs of the new regulatory authority that will oversee the profession, Accountancy Age has learned.
Plans for the new two-tier structure will be put to a vote of members of the existing eight bodies that oversee the profession in September.
Despite government backing for the new Insolvency Practices Council and the supporting interposing body, Whitehall officials have ruled out funding the new structure.
One senior practitioner said he hoped the costs would be met by the profession’s insurance company, The Farringdon Insurance Scheme, which is obliged to plough any profits back into causes established for the good of practitioners.
But the scheme is run by independent trustees and insolvency licence holders have no power to demand how the money should be spent, though it is expected to provide £250,000 in initial funding.
This could leave practitioners to pick up the tab for the nine-member IPC and eight-member interposing body.
‘We are hoping that some of the funding will be met by a grant from the insurance scheme, but it will depend on whether there is a dividend. Otherwise the representative bodies will pay for it by a levy on members,’ said a source.
The interposing body will appoint the chairman of the council in order to meet the public’s expectations of greater transparency and act as a funding go-between. The council – six lay members (including the chairman) and three insolvency practitioners – is likely to be established as a company limited by guarantee to take advantage of charitable status.
The news coincides with figures from the Society of Practitioners of Insolvency which, it says, show the American way of treating bankruptcy, hailed by the government as crucial for an entrepreneurial culture, could be a disaster waiting to happen. In 1998, the US had almost nine times as many bankrupts per head of population aged over 16 than England and Wales. Many were due to credit card debt rather than failed businesses, the SPI said.