21 septiembre 2023 Jane Larner Contract and Commercial - Corporate Governance - Dispute Resolution - Risk and Compliance

The Government provides further clarity on the future of insolvency regulation in the UK

The government has published its response (the Response) to its consultation (the Consultation) on “The Future of Insolvency Regulation”, which ran between 21 December 2021 and 25 March 2022. The Consultation sought views on a large number of proposed reforms to the way in which insolvency practitioners are regulated, in what will be the biggest reform of the sector since formal insolvency regulation was introduced in 1986.

The Response proposes changes to the current framework which aim to address loopholes and weaknesses, and provide a regime that can accommodate modern practices and requirements, bringing insolvency regulation in line with other regulated and qualified professions. The government’s stated aim is to strengthen insolvency regulation and increase public confidence in the framework.

Although the proposal to establish a single independent regulator for Insolvency Practitioners situated within the Insolvency Service to replace the four Recognised Professional Bodies (RPBs) is not being taken forward at this time, the government intends to legislate to introduce a new power to enable the creation of an independent single regulator, should that be needed in the future. Meanwhile the government will challenge the current RPBs to deliver significant and measurable improvements to the quality of regulation through non-legislative means.

Other significant proposals include: 

  • extending regulation beyond individual Insolvency Practitioners to firms providing insolvency services, which are not currently regulated in this context.
  • reforming the way ethical and professional standards for the profession are set, working with experts from the sector and the RPBs.
  • establishing a public register of all authorised Insolvency Practitioners and firms providing insolvency services that will include details about their regulatory history, including determined regulatory sanctions. The register will not replace the current licensing regime and the government will consult on how and where it should be kept.
  • creating a scheme of compensation/redress for those affected by an Insolvency Practitioner’s acts or omissions. Detailed proposals will be put out for consultation at a later date. 
  • strengthening the current framework by which Insolvency Practitioners are required to hold security (bonding) to cover losses in the event of their fraud or dishonesty. However, the government acknowledged the general opinion of respondents to the consultation was that bonds provide sufficient security for special managers and so will not be exploring reform of special manager security further at this time.

Next steps

While some of these measures can be introduced without new legislation, those that do require legislative change will be taken forward “when Parliamentary time allows” and following any further consultations that are appropriate. In the meantime, the government intends to work closely with the RPBs on non-legislative measures to drive substantial improvements to the framework. 

The Government’s response is available here: The future of insolvency regulation: Government Response - GOV.UK (www.gov.uk)