Confidence in the insolvency and enforcement regimes
By Steven Wood, Practice Support Specialist (Insolvency)
3 May 2023
As part of its five-year (2021-26) strategic plan, the Insolvency Service commissioned qualitative research to measure Insolvency Practitioner and debtors’ confidence in the insolvency and enforcement regimes.
The research and analysis has now been published.
Overall confidence in the regimes
Overall, while the confidence of stakeholders in the insolvency and enforcement regimes is noted to be mixed both across and within stakeholder groups, for stakeholders with wider experience of the system - academics, legal professionals and creditors - confidence is higher.
Understandably directors, like debtors, are largely unable to see beyond the outcome of their own cases and therefore typically have a lower level of confidence in the regimes, which is tied to that outcome. This is the case particularly for disqualified directors or those in compulsory liquidation.
Key findings
Some key findings from the research are noted below:
- Academics, creditors and legal professionals, in their capacity as stakeholders, all have a wider view of the regimes beyond individual cases. They believe that the regimes, on balance, are fair. They acknowledge the competing interests of different stakeholders and the difficulties these present, but they consider that the regimes are broadly able to balance those interests.
- Stakeholders with knowledge or experience of enforcement across all stakeholder groups largely feel that the regimes have the ability to tackle fraud and financial wrongdoing.
- Perceptions of the ethics and standards of most stakeholders about the insolvency process are felt to be typically high. As a stakeholder group, insolvent and disqualified directors are again influenced by the outcome of their experiences and reduced understanding of the regimes.
- Costs throughout the regimes are thought to be high across all stakeholder groups. However, there is an understanding that the processes require the engagement of professional services at multiple stages, which inevitably command high fees and lead to high costs.
- Perceptions of timescales vary across stakeholders. However, there is largely acknowledgement across stakeholders that the insolvency and enforcement processes require significant investment in time, given the volume of work required.
- Academics, creditors and legal professionals largely concur that the regimes are intuitive and transparent. This view is shared by a number of directors with prior familiarity with insolvency.
- Many stakeholders agree that the regimes are world-leading and are largely very positive about the UK’s regimes when comparing them to those of other countries.
Comment
The findings from the research are largely positive, particularly among stakeholders with wider experience of the insolvency and enforcement regimes. The more mixed view of directors can, understandably, largely be attributed to the outcome and experiences of individual cases. A director who ends up as disqualified or whose company is liquidated against their wishes is likely to have an automatic perception of unfairness and feeling of dissatisfaction with the process.
The report’s executive summary concludes that the findings are broadly in line with, and further reinforce, the findings from the previous qualitative research, namely the perception that the UK’s regimes are broadly fair and world-leading.