The Government have today published their response to their consultation “The Future of Insolvency Regulation”, which was published in December 2021. This consultation was open for 13 weeks and outlined proposals for significant reform to the regulatory framework for insolvency practitioners.
The insolvency profession plays a key role in driving economic growth and supporting those in financial distress. The unique responsibilities that insolvency practitioners bear and the decisions they take help save jobs and businesses, and deliver a fair, effective and orderly winding up to deal with financial failure where that is not possible. The vast majority of insolvency practitioners do a good job in challenging circumstances, but there continue to be instances of poor conduct that directly impact those closely involved. This tarnishes the reputation of the whole profession and undermines confidence. Insolvency practitioners should be regulated within a modern framework that reflects the way the insolvency sector has developed since formal insolvency regulation was first introduced in 1986.
The Government received 102 detailed responses to the consultation. Officials also obtained further relevant evidence through targeted stakeholder engagement. Most proposals received significant support amongst a broad range of stakeholders. We are grateful for the views and evidence provided as part of the consultation process, which has informed the package of reforms we will take forward when parliamentary time allows. This most notably includes:
challenging the current four professional body regulators to deliver significant and measurable improvements to the quality of regulation through non-legislative means, whilst keeping options to replace the current regulatory model with a single regulator of insolvency practitioners under review;
expanding regulation to include firms providing insolvency services, alongside the existing regulation of individual insolvency practitioners;
reforming the way ethical and professional standards for the profession are set;
introducing a public register of authorised insolvency practitioners and firms providing insolvency services, that will include relevant and proportionate regulatory information;
developing and consulting on proposals to introduce a compensation-redress scheme for those affected by an insolvency practitioner’s acts or omissions;
strengthening the bonding framework, which requires insolvency practitioners to hold security in the event of their fraud or dishonesty.
The Government’s response to the consultation reaffirms their commitment to ensuring the insolvency profession is effectively and robustly regulated, with a regulatory framework fit for the future. These reforms, which represent the biggest change to the regulatory framework in nearly 40 years, will address weaknesses with the current regulatory framework, modernise the regime and increase public confidence in regulation.
A copy of the consultation response may be found online at:
[HCWS1013]