This guide provides information on how insolvency practitioners are authorised and regulated in Great Britain
Overall responsibility for insolvency policy in Great Britain (England, Wales and Scotland) rests with the Secretary of State for Business, Innovation and Skills. On a day-to-day level, the Insolvency Service, through its insolvency practitioner policy section, is responsible for overseeing the insolvency regime on the Secretary of State’s behalf. Insolvency policy and legislation in Northern Ireland is the responsibility of the Northern Ireland Assembly, although it is similar in virtually all respects to that in Great Britain.
Insolvency practitioners and the recognised professional bodies
Under the provisions of the Insolvency Act 1986, the Secretary of State recognises certain independent professional bodies, called recognised professional bodies or RPBs, for the purposes of authorising their members to act as insolvency practitioners. In addition, a small number of insolvency practitioners are authorised by the Secretary of State directly. Only insolvency practitioners can legally act as office holders in insolvency proceedings: as trustees in bankruptcy; liquidators, administrators and administrative receivers of companies; and supervisors of Individual Voluntary Arrangements and Company Voluntary Arrangements.
The Insolvency Service regulates the RPBs to ensure that the members they authorise are fit to act as insolvency practitioners. The RPBs are independent bodies that make their own membership rules and regulations, but they are required to have in place rules to ensure their insolvency practitioners meet acceptable requirements as to education, practical training and experience. The commitments made by the RPBs are set down in a “Memorandum of Understanding”, which records the agreement between the RPBs and the Secretary of State.
One of the main requirements is that individuals must pass the Joint Insolvency Examination to qualify as insolvency practitioners. When they act as an insolvency practitioner the law requires them to have in place a ‘bond’, a form of insurance, against which a claim could be made if the practitioner acts fraudulently or dishonestly. All insolvency practitioners are also subject to regular monitoring visits (at least once every six years, and more frequently if considered necessary) from their authorising bodies – the Insolvency Service, acting on behalf of the Secretary of State, and the RPBs. Monitors seek to establish that insolvency practitioners are adhering to the legislation, and to accepted standards such as Statements of Insolvency Practice (SIPs), the Insolvency Code of Ethics and the relevant rules and regulations of the authorising bodies.
Monitors from the Insolvency Service visit each RPB on a regular basis (usually at least once in three years) to ensure that the RPB is complying with the Memorandum of Understanding. If any RPB fails to meet the requirements, the matter may be referred to the Secretary of State, which could result in its status as a recognised professional body being revoked. Due to the Insolvency Service’s role in monitoring the RPBs, it is often regarded as the “regulator of regulators”.
It is an insolvency practitioner’s authorising body that properly considers complaints about his or her professional conduct. The Insolvency Service will consider complaints about the RPBs and where necessary will investigate to determine whether they have correctly followed their own complaints procedures (but will not re-investigate a complaint about an individual practitioner) and whether those procedures are adequate.
It is important to note that for the most part, only matters relating to professional conduct can be considered. The only body that can confirm, reverse or otherwise modify a decision or action of an insolvency practitioner is the court. This power is not conferred upon the Secretary of State, his officials at the Insolvency Service or the insolvency practitioner’s RPB.
Where a complaint is upheld by an RPB, the RPB decides the penalty to be applied. Possible penalties include:
- a fine
- a restriction of the insolvency practitioner’s licence
- withdrawal of the insolvency practitioner’s licence
A complaint upheld by the Secretary of State against an insolvency practitioner authorised by the Secretary of State may result in an insolvency practitioner’s licence being withdrawn.
Where a complaint is not upheld and the complainant remains unsatisfied, some of the RPBs have a procedure where the complaint can be referred to an independent complaints reviewer.
Other principal bodies
The Joint Insolvency Committee (JIC) is a major forum for discussion of issues of concern to the profession and has representatives from each of the RPBs and from the Insolvency Service. The JIC is particularly concerned with professional and ethical standard setting and with achieving consistency across the profession.
The Insolvency Practices Council (IPC) investigates and examines the ethical and professional standards of the insolvency profession, puts proposals to the bodies that represent the profession and makes recommendations for their consideration. It also considers whether standards are being adopted, observed and enforced. It is funded by a levy on the authorising bodies, which they in turn recover from the insolvency practitioners they licence.
The Association of Business Recovery Professionals which is known as R3, is the trade association for insolvency practitioners. R3 represents the views of its members to government and the media. It gives advice to its insolvency practitioner members on insolvency law and practice. It organises courses, conferences and meetings to satisfy its members’ continuing professional education needs. R3 also gathers and publishes statistics on corporate recovery and personal insolvency.