The Government’s long-awaited response to the consultation seeking views on ‘The Future of Insolvency Regulation’ was finally published on 12th September 2023.
This comprehensive package of reforms will be the biggest shakeup of the sector since the introduction of formal insolvency regulation in 1986 and aims to reinforce insolvency regulation and raise public confidence in the framework.
In summary, it tackles the current weaknesses, closes a loophole in the framework and opens the door to further reform. While it has stopped short of replacing the four Recognised Professional Bodies (RPBs) with a single independent regulator for Insolvency Practitioners, new legislation is planned to enable the creation of such an independent single regulator, should it be necessary in future.
In the meantime, the government is increasing pressure on the current RPBs to deliver substantial, measurable improvements to regulation standards.
So, this response pulls together a synopsis of all the responses and presents the reforms that the Government will take forward when Parliamentary time allows.
These will include:
- Extending the existing regulation covering individual Insolvency Practitioners to include all firms providing insolvency services
- Working with the RPBs and experts from the sector to reform how ethical and professional standards are set
- Setting up a comprehensive public register of authorised Insolvency Practitioners – plus all firms providing insolvency services – including their regulatory history and any sanctions incurred. This is not intended to replace the current licensing regime the Government will consult on how and where it should be kept
- Setting up a compensation/redress scheme for anyone affected by an Insolvency Practitioner’s acts or omissions. Details of this are to follow
- Reinforcing the current Bonding framework requiring Insolvency Practitioners to hold security (bonding) to cover losses in the event of their fraud or dishonesty. However, the Government has accepted an industry consensus that bonds do currently offer enough security for special managers, so no further reform is expected in this area.
