Insolvency regulation strengthened
A package of amendments takes effect from 1 October 2015 which will strengthen the regulation of the insolvency profession.
A number of measures will take effect on 1 October 2015, which are aimed at strengthening and modernising the insolvency regime. The measures are being introduced through commencement of provisions made in the deregulation Act 2015 and the Small Business Enterprise and Employment Act 2015.
Authorisation of Insolvency Practitioners
A new regime will allow for the partial authorisation of insolvency practitioners. Insolvency practitioners will be able to be authorised in relation solely to companies, solely to individuals or to both (fully authorised - as is currently the case).
Changes will be required to the Joint Insolvency Examination used to qualify IPs to reflect the new partial authorisation regime. The necessary changes will not be able to be introduced until the November 2016 exam sitting at the earliest.
The Secretary of State will no longer directly authorise insolvency practitioners, and so in future, all insolvency practitioners will be authorised by Recognised Professional Bodies. IPs currently authorised by the Secretary of State shall have until 1 October 2016 to seek authorisation from one of those bodies.
Provisions introduced by the Insolvency Act 2000 intended to allow non-insolvency practitioners to act in relation to voluntary arrangements only, which were never used and are no longer considered necessary, will be removed.
Strengthening the regulatory framework
Measures are also being introduced to reform the regulatory regime for insolvency with the aim of strengthening the regulatory framework for IPs, thus providing greater confidence in the insolvency profession.
For the first time a set of regulatory objectives for the insolvency regime is introduced. These include:
- Having a system of regulating IPs that secures fair treatment for persons affected by their acts and omissions, reflects the regulatory principles (transparent, accountable, proportionate, consistent and targeted only where action is needed) and ensures consistent outcomes;
- Encouraging an independent and competitive IP profession where high quality services are provided at a fair and reasonable cost, where IPs act with transparency and integrity and consider the interests of all creditors in any particular case;
- Promoting the maximisation of the value and promptness of returns to creditors; and
- Protecting and promoting the public interest.
The Insolvency Act 1986 is also amended from 1 October 2015 to:
- Introduce a range of sanctions (financial penalty, reprimand or revocation of status as an RPB) so that proportionate action can be taken where the Secretary of State is satisfied that an Recognised Professional Body (RPB) is not adequately fulfilling its role as a regulator,
- Allow the Secretary of State to apply to court to directly sanction an IP where it is in the public interest, and
- Clarify the purpose for which the Secretary of State can charge fees to RPBs for the maintenance of their recognition.
The regulatory objectives and sanctions apply for acts or omissions by RPBs in discharging their regulatory functions, or failure to comply with a new requirement, from 1st October 2015.
The power to apply to court to directly sanction an IP in the public interest applies to conduct on or after 1st October 2015, notwithstanding the date of appointment as office holder.
The Secretary of State will also be able to apply to court to secure compliance with a requirement that the Secretary of State has placed on an RPB.
A reserve power to establish a single regulator of IPs, which would lapse if not used within 7 years, is also commenced.