BusinessBusiness RecoveryInsolvency profession responds to OFT report

Insolvency profession responds to OFT report

Insolvency profession responded to OFT report saying regulation is already in place although it could be better

The Office of Fair Trading (OFT) report into the corporate insolvency market
has caused a stir from the profession which believes regulation is already in
place and should be better administered.

Many within the insolvency profession believe existing legislation can work
if better utilised.

A statement from the Insolvency Practitioners Association (IPA), a licensor
of insolvency practitioners said: “While acknowledging some of the points made
by the OFT, it is still disconcerting that the creditor community, and
particularly government departments which invariably feature in insolvencies, is
not more active in exercising its rights under existing regulations.

The IPA said it found the OFT report “surprising” as it did not allow changes
to the insolvency act to take affect before drawing its conclusions. One change
to the act, which was amended in April, now allows creditors to approve the
structure of fees accrued by insolvency practitioners (IPs) prior to
administration.

Anthony Harris, director and insolvency practitioner at Critchleys, said
there were some “rogue” insolvency practitioners in the profession however,
no-one, including the governing body the Insolvency Service, seems to be doing
anything about them.

He said the solution was not to increase regulation across the board and
instead to better utilise existing legislation.

David Butler, insolvency practitioner from Hillier Hopkins, believes although
the investigation took place over several months, starting in November 2009, the
OFT had not completely grasped how the insolvency profession works.

“The report confuses a lack of control by unsecured creditors with a lack of
interest – unsecured creditors can veto an IP’s fees, they can ask the courts to
look at IP’s fees, and they can complain to the IP’s regulatory body, which will
rightly impose very severe financial sanctions if it finds that the IP has drawn
excessive or unauthorised fees,” said Butler.

Commenting on the introduction of an independent complaints commission for
creditors, the IPA said: “The number of complaints against practitioners is in
part an inevitable by-product of insolvency work, as creditors and others almost
inevitably by definition lose money or jobs or sometimes their businesses in an
insolvency.

“As the Insolvency Service’s annual reports show, seldom are those complaints
found to relate directly to the conduct of the practitioner.”

The IPA added although the OFT did not review the role of the Official
Receiver, which in some cases competes with IPs for work, one should take place
in the future.

Further reading:

Insolvency
Service backs OFT claim that practitioners charge too much

OFT
wants “far-reaching reform” of corporate insolvency regime

Insolvency
watchdog under fire

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