A very critical report on the insolvency profession in the UK – Resolving-Insolvency-APPG-on-Fair-Business-Banking-and-Humphries-Kerstetter.pdf (appgbanking.org.uk) has come from the All Party Parliamentary Group on Fair Business Banking, of September 2021.
The dramatic opening lines of the report are these:
The production of this report has been a sobering experience. We started out aware of a number of complaints about Insolvency Practitioners (IPs). However, it was only when we put out a call for evidence that we became aware of the volume and severity of the complaints in this area. We were presented with evidence of intimidation, deception, dishonesty and even misappropriation of assets, all involving IPs supposedly performing their court appointed functions.
The nature and tone of the report were not unanticipated given various comments made in the lead up to its release, and given KPMG UK recently being fined £15m by the Financial Reporting Council in relation to the conduct of an IP (who was fined £500,000); although the events occurred back in 2010. See News I Financial Reporting Council (frc.org.uk)
That KPMG matter was then the subject of rcent comment by the APPG which said that the
“clear conflict of interest and lack of objectivity in [the matter] demonstrates a wider issue with the insolvency industry where practitioners are reliant on good relationships with large clients to get further work. Cosy relationships between firms and their clients lead to often devastating outcomes for the businesses who have no choice but to put their faith in a process that is supposed to protect the interests of creditors and stakeholders alike”.
R3’s initial response to the APPG report R3 | Press, Policy & Research | News pointed out that in 2020,
“out of almost 124,000 personal and corporate insolvency procedures, there were only 371 complaints against IPs referred to regulators – or one complaint in every 334 cases”.
The APPG calls for a single insolvency regulator, rather than the four recognised professional bodies at present. R3 says it does not necessarily oppose this but it does not see that as “a silver bullet solution for concerns about insolvency regulation”.
In Australia, the issue of a single insolvency regulator has a very different meaning. The UK’s meaning is in effect a call for our direct government regulation rather than the co-regulation systems of UK and New Zealand. While there are merits of each approach, Australia’s separate government regulation of personal insolvency by AFSA and of corporate insolvency by ASIC, with MSME/small business insolvency somewhere in between, is not a good example for the UK to examine.
As to IPs themselves, in the UK, whether the APPG report is balanced in addressing all the relevant issues in insolvency practice, we here at Murrays Legal are yet to assess, but will do so, and report.