Standards of insolvency practice
The required standards of practice consolidate existing best practice in a single concise form for the ease of use by members who are undertaking work as licensed insolvency practitioners. These requirements are binding on all ICAS IPs and should be read in conjunction with the Guide to Professional Ethics and the Statements of Insolvency Practice. Practitioners should also be conversant with all legislative and other requirements relevant to their work. This statement cannot be and does not set out to be a definitive guide on all administrative matters.
A licensed IP owes duties to the public, including those who retain or employ him, to the profession of which he is a member, to fellow practitioners and, where relevant, to his partners. In carrying out his duties he should remember at all times the responsibility which has been placed upon him by Parliament and ICAS as the Recognised Professional Body which has provided him with a licence.
A practitioner should be prepared and be able to demonstrate to his licensing body that he has administered his practice in a manner such as to satisfy a reasonable person's view as to his proper conduct.
Parliament has placed upon the practitioner certain duties. Some of these duties arise specifically from his appointment as an IP in accordance with the Insolvency Act 1986. Others arise from his wider responsibility to companies under the Companies Acts 1985 and 2006, to the Secretary of State for Industry under the Company Directors Disqualification Act 1986, to the Secretary of Employment under the Employment Rights Act 1996 and to both companies and individuals under other legislation or other requirements of law.
The organisation of work within the office of each practitioner will vary and in part reflect the size of the practice within which he works as well as the size of the task with which he is required to deal. Broad outlines of what is expected from the practitioner are set out in the following paragraphs as part of the arrangement for ensuring a good and effective service.
Before accepting any appointment the practitioner should consider the implications of such an appointment, in the light of the most recent Guide to Professional Ethics. Clear written evidence of the matters considered and the conclusion reached should be recorded with the Practitioner's papers.
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The practitioner should not accept appointment unless he is satisfied that he has sufficient resources to perform his duties. He should be able to demonstrate the thinking behind his allocation of resources to each aspect of the cases he administers. The practitioner should have arrangements in place to progress his cases in the event of his prolonged incapacity.
On retiral, the insolvency practitioner must make arrangements for all cases to be completed within a 3 year period or have them transferred to another practitioner if they cannot be completed.
The practitioner should only delegate work to staff with appropriate experience and qualifications. Where sub contract insolvency staff are engaged there should be evidence maintained to demonstrate that the IP controls the quality of the work performed.
Knowledge and Experience
The practitioner should maintain a permanent and on-going record of training of practitioners and staff levels in a form such as to enable the authorising body, if it so requires, to review the extent, degree and adequacy of training and of keeping personnel up to date with changes in legislation and good insolvency practice.
The practitioner and his staff should have access to all the relevant Acts, supporting Statutory Instruments, Insolvency Guidance Notes, Statements of Insolvency Practice, Insolvency Practitioners Regulations and suitable reference books.
Practitioners are jointly and severally responsible to third parties for the actions of co-appointees. Where there is a joint appointment with a practitioner from another firm, the division of responsibilities and duties should be agreed at the commencement of the assignment and should be clearly recorded in an exchange of letters.
The practitioner should maintain adequate records for the methods by which each case is controlled and progressed through both commercial decisions and legal requirements.
It is anticipated that this will require the establishment and maintenance of a system of permanent files with supporting progress checklists.
As part of that system, practitioners should maintain adequate records to show that appropriate investigations have been carried out to satisfy the legal requirements of reporting both to the Department of Trade and, where relevant, the Procurator Fiscal and the Accountant in Bankruptcy, and also to identify assets to be realised and liabilities to be settled.
Where the practitioner has moved firms or retired he must demonstrate that communication is being maintained and matters are being progressed timeously as he is still responsible for the case.
The practitioner should be able to demonstrate that he has a work organisation which will control and ensure an adequate review of correspondence, other communications and transactions both within his own office and, if appropriate, at the separate location of a case.
The practitioner should maintain each case as a separate entity with separate accounting, banking and cash control and operate timely investment procedures although these may be within the overall office work organisation procedure. Clients' Monies Regulations and the Statement of Insolvency Practice in Handling of Funds in Formal Insolvency Proceedings require that no funds or assets of cases should be inter-mingled with those of the practitioner or with other cases. Where funds are received which are clearly the property of third parties, care should be taken to ensure that these are separately maintained.
The practitioner should ensure that appropriate authority has been obtained for the payment or part payment of his proper remuneration before he withdraws such funds from any case. Furthermore the practitioner should be prepared to justify the amount of any remuneration received by the reference to time records or similar which may require to be submitted in support of fee requests.
As part of the accounting function, the practitioner should ensure that he is able to comply with all the requirements of his office, with regard to maintaining proper books together with supporting documentation. (Merely retaining copy bank statements does not amount to maintaining proper records).
Advice from Other Professionals
Where the practitioner's own knowledge and experience of matters outside the basic duties of an insolvency office holder is insufficient to deal with all professional and commercial aspects of his responsibilities, he should take advice from suitably qualified members of other appropriate professions. The practitioner should retain details of advice, evidenced in writing. He should ensure that the costs thereof are not excessive.
The practitioner must obtain an enabling bond before he can act in relation to the estate of any insolvent person or company.
Specific Penalty Insurance
The insolvency practitioner is reminded of the requirement to obtain specific penalty insurance in every case and to ensure that the Bordereau is lodged with the Institute timeously. The level of cover should be subject to periodic review.
The practitioner should pay due attention to all guidance notes issued by the Recognised Professional Bodies, the Insolvency Service and the Accountant in Bankruptcy on the conduct of cases. Practitioners are required to take appropriate action to implement guidance given in any insolvency monitoring reports and to respond timeously to requests from the Insolvency Permit Committee.
Required Standards of Insolvency Practice Explanatory Foreword
This explanatory foreword explains the scope and authority of Required Standards of Insolvency Practice approved by the Council of the Institute of Chartered Accountants of Scotland in April 1997. It should be read in conjunction with the Required Standards of Insolvency Practice to which it forms a collective preface.
Required Standards of Insolvency Practice lay down the appropriate means ("best practice") to be adopted by licensed insolvency practitioners having regard to the provisions of the Insolvency Act 1986, the Bankruptcy 1985 (Scotland) Act as amended by the 1993 Act and the secondary legislation (mainly the Insolvency Rules 1986 as amended).
Failure to follow the Required Standards of Insolvency Practice may form the basis of a report to the Insolvency Permit Committee and / or Investigation Committee, unless the practitioner can persuade the Institute that the course of action which he followed was appropriate in the circumstances. (Whereas such failure may not of itself lead to regulatory action or constitute misconduct, the practitioner will therefore be required to justify any departure from the Required Standards of Insolvency Practice.)
Practitioners are advised that a Court of Law may, when considering the adequacy of the work of an insolvency practitioner, take into account any pronouncements or publications that it thinks may be indicative of good practice. Required Standards of Insolvency Practice are likely to be so regarded.
The Institute does not warrant that adherence by licensed insolvency practitioners to the Required Standards of Insolvency Practice will in any particular case or set of circumstances prevent them from civil or criminal suit, and it shall not be liable to them for any liability, loss, damage, cost or expense arising directly or indirectly in connection with their use.
Standards of Insolvency Practice apply to the Institute's Insolvency Permit
holders throughout the UK in respect of all of their professional work.
Effective Date: 1 May 1997