There are a multiplicity of bodies involved in the insolvency industry. There are the eight Recognised Professional Bodies (RPBs), which include: the Association of Certified Chartered Accountants (ACCA), the Institute of Chartered Accountants in England and Wales (ICAEW), the Institute of Chartered Accountants in Ireland (CARB - ICAI), the Institute of Chartered Accountants in Scotland (ICAS), the Insolvency Practitioners Association (IPA), the Solicitors Regulation Authority (SRA, Law Society), the Law Society of Scotland (LSS) and finally the Secretary of State for Business Enterprise and Regulatory Reform (BERR - Lord Mandelson of Foy). Additionally there are also various accountant and lawyer trade industry bodies such as the Association of Business Recovery Professionals (R3), the Institute for Turnaround, and the Insolvency Lawyers' Association. Finally there are the numerous debt advice agencies, e.g. National Debtline, the Citizens' Advice Bureau, the Money Advice Trust, the Consumer Credit Counselling Service, Bankruptcy Advisory Service, the Bankruptcy Association, etc. All of these bodies employ, inter alia, separate secretariats, full-time employees, researchers and such like. The cumulative cost of running them all in terms of their respective insolvency functions must be fairly high. There must be duplication and effort across the respective bodies, at least to some extent. This issue is however perhaps for another blog entry. We must now focus however on what I believe is one of the most proactive, critical, and useful bodies that is involved in the sector, namely, the Insolvency Practices Council (IPC). The IPC has to some extent taken on the mantle of the Joint Insolvency Monitoring Unit (JIMU), which is now defunct. The IPC's 2008 Annual Report has now been published in hardcopy and is available on their website.
The IPC is a public interest body which was founded in 2000. It is funded through a levy on Insolvency Practitioners (IPs). If it has one slight problem with its remit, it relates to this, namely that its terms of reference restrict its considerations and recommendations to IPs and their activity. As indicated by the organisation list above, there are many different groups involved in the administration of insolvent estates and advice giving in relation to the same. If the IPC's effectiveness is hampered by this artifical fetter this should be remedied with an expansion of their remit. The IPC has nine members which include both practitioner members (Dr Hamish Anderson, Mr Ron Robinson, Mr Peter Souster) and lay members (Mr John Hanlon, Dr Dianne Hayter, Mr Phillip McNeill, Mr David Tracy, and Mr Malcolm Watkins) and is chaired by Mr Geoffrey Fitchew CMG. The organisation's secretary is Colonel Mike Stancombe. The IPC 2008 Annual Report follows the same pattern as previous years (previous annual reports can be accessed here) and contains a number of key recommendations on both the corporate and personal side of the subject. These include:
"Personal Indebtedness: Individual Voluntary Arrangements and Debt Management Plans
The IPC recommends that:
- The Insolvency Service and the insolvency regulators should monitor the IVA market to determine whether debtors, who can only make monthly repayments of less than £200, are being unreasonably refused IVAs. If this is confirmed, the Government should put pressure on creditors to allow such IVAs to be approved, if necessary by adopting more flexible fee structures;
- The Insolvency Service should take the earliest legislative opportunity to reintroduce the substance of their proposals for Simplified IVAs;
- The Insolvency Service should publish regular aggregate statistics on the failure rates of IVAs, starting this year. It should provide the RPBs with regular IVA failure statistics for each licensed IP to help them focus their monitoring. The Insolvency Service should also carry out further survey research into the reasons for IVAs failing;
- The Insolvency Service and the OFT should work through the IVA Standing Committee to obtain commitments from debt-advice organisations and the creditors or their agents to produce meaningful aggregate statistics on the average duration and success/failure rates of Debt Management Plans (DMPs) to enable debt advisers and debtors to make more informed decisions; and
- The Government should, with the help of the FSA and the Financial Reporting Council, investigate whether, as is widely believed in the debt advice sector, there are differences in the accounting and solvency rules or in their application, which allow creditors to reduce the extent to which they write down impaired debts covered by DMPs compared with IVAs and bankruptcy.Corporate Insolvencies: Pre-packs in AdministrationsWe recommend that:
- In monitoring the reports on pre-packs in administrations, which IPs are now required to provide to creditors under the Statement of Insolvency Practice (SIP 16), both the insolvency regulators and the Insolvency Service should check that the administrators have taken all reasonable steps to market the business or to approach other possible buyers;
- The Insolvency Service and the insolvency regulators should also monitor compliance with the requirement in the new Ethical Code that IPs, who have previously advised the directors of a company prior to its entering administration, should not accept an appointment as the administrator when there is a material risk that they may be seen as lacking the necessary objectivity and independence to serve the interests of all the creditors; and
- Any review of the conduct of directors following a pre-pack should consider whether either fraudulent or wrongful trading has taken place. Appropriate action should then be taken by IPs and the Insolvency Service where either is found to have occurred."
"Complaints HandlingIn the light of a second research project by the Nottingham Law School for the IPC, which compares the complaints and disciplinary procedures of the insolvency regulators with those of other professions, we recommend that:-
- All personal debtors who believe that they have been given bad advice by an IP are able to bring their complaint to the Financial Ombudsman Service. This would bring IPs into line with other debt advisers.
As regards other complaints against IPs, we believe that there should be:-
- A distinct complaints procedure for handling those complaints which fall short of the threshold required for disciplinary action, eg, isolated cases of inadequate professional service;
- An independent external reviewer of complaints to whom a complainant can appeal if their complaint is rejected in the first instance; and
- The independent reviewer should be able to award appropriate redress to complainants whose complaint is upheld. In many cases an apology will be sufficient, but in a minority of cases a consolatory monetary award for distress or inconvenience suffered may be justified."
It will be interesting to note to what extent the IPC's comments are taken on board at the Insolvency Service and elsewhere. The IPC report next year may note the impact of their recommendations this year.