Regulation of Insolvency Practitioners (IPs)
This briefing paper provides an outline of the current regulation of insolvency practitioners (IPs) and how to make a complaint. It also considers Insolvency Service proposals for reform of the current IP regulatory framework.
Insolvency proceedings are formal legal measures taken to deal with individual and company debt; only a licensed insolvency practitioner (IP) can be appointed to act in such proceedings. The current regulatory framework has been in place since October 2015. All IPs must be licensed and regulated by a Recognised Professional Body (RPB). For Great Britain, the Secretary of State, by order, recognises independent RPBs for the purpose of authorising their members to act as IPs. Under the Insolvency Act 1986 (IA 1986), any individual who acts as a liquidator, trustee in bankruptcy, administrator, administrative receiver, or as nominee or supervisor of a voluntary arrangement (IVA or CVA) must be authorised to act as an IP by one of four RPBs. In carrying out their duties, IPs must comply with statutory requirements and follow best practice and ethical guidance.
The Insolvency Service acts as oversight regulator of IPs on behalf of the Secretary of State for the Department for Business and Trade (formally BEIS). The Insolvency Service works with the insolvency profession to ensure that professional and regulatory standards are maintained or improved where appropriate, and that professional misconduct by an IP is addressed. Each RPB is required to have proper procedures in place to ensure that a complaint made against an IP it authorises is investigated. The Complaints Gateway, hosted by the Insolvency Service, acts as a single point of contact for making a complaint about an IP. The Gateway also enables the Insolvency Service to monitor the progress and outcome of those complaints.
In October 2015, the Small Business Enterprise and Employment Act 2015 inserted into the IA 1986 new regulatory objectives for the IP regime. The regulatory objectives, which both the RPBs and the Insolvency Service work to achieve, aim to ensure fair treatment, transparency, integrity, consistency, and the delivery of high-quality services at a reasonable cost. Importantly, the 2015 Act gave the Secretary of State the power to replace the RPBs with a single, independent regulatory body should it be considered necessary.
On 12 July 2019, the Insolvency Service published a Call for evidence (PDF) on the regulation of IPs and the effectiveness of the current regulatory landscape. Specifically, it sought views on whether the regulatory objectives have had a positive impact or whether further reform might be required.
From 21 December 2021 to 25 March 2022, the Insolvency Service consulted on the Future of Insolvency Regulation. The consultation - which applied to England, Wales, and Scotland – included the following key proposals:
Establishing a single independent regulator to sit within the Insolvency Service, replacing the current system of using RPBs.
- Extending regulation to firms that offer insolvency services as well as individual IPs.
- Creating a single public register of all individuals and firms that offer insolvency services.
- Creating a system of compensation and redress where a party has been adversely impacted because of poor service or an error by an IP or a firm.
- Amendments to the current arrangements for IPs to hold security (bonding) to cover losses to creditors in the event of fraud or dishonesty.
As at the date of writing, the Government is still analysing feedback to the consultation.
This briefing paper provides information on the current regulatory structure for IPs and how a complaint against an authorised IP might be investigated. It also considers recent Government proposals for reform.
Insolvency in England and Wales is regulated by the IA 1986 (as amended), the Insolvency (England and Wales) Rules 2016, and the Enterprise Act 2002 (as amended). Insolvency is a devolved function in Northern Ireland, although the current regime closely aligns with that in England and Wales. The Insolvency Service of Northern Ireland has oversight of IP regulation. Scotland shares the same corporate insolvency law as England and Wales but has its own separate bankruptcy procedure, known as ‘sequestration.’ Bankruptcy and corporate insolvency in Scotland are handled by the Accountant in Bankruptcy.