Soon IPs all over the land will be getting excited (well some may, others will have their head in their hands) by changes to the Insolvency Rules which have moved on very little for nearly 30 years, so I think the original legislators must have done a good job in creating a flexible and robust system.
However recently there has been a lot of criticism of IPs and the system (please blame the system not the IP) that the rules are no longer fit for purpose and creditor engagement is declining to the point of being nonexistent! The bin has become the filing system of choice for most documents issued by IPs to the extent that even dividend cheques have not been cashed.
The rules were written before most people had mobile phones, and the internet was nothing but a nerdy dream!
A lot of the proposed changes are around the issue of creditor engagement and will involve the use of not only the old fashioned postal system , but the internet, conference calls, video conferences or any other means the IP thinks appropriate, which is great, but there is nothing like a good old fashioned creditors meeting and looking into the eyes of the director and asking why the business failed. Maybe it is time to reintroduce trial by combat to creditors meetings, it may certainly draw the crowds in.
Creditors need to watch out and be very careful of deemed approval, because if creditors don’t object things could happen which they don’t agree with. For example an IP they don’t approve of could be appointer liquidator, the Administrators proposals they don’t like could be approved and the IPs fees could be approved without scrutiny.
What should the creditor do with any papers he receives concerning a customer’s business failure, well not put them in the bin, but give us at BHP Clough Corporate Solutions a call, and we can advise on the best way forward and using our creditor services systems we can monitor the failure for activity and update our advice to you the creditor
Whilst I have your attention, I would like to get on my soap box and talk about IP regulation, I know it isn’t an exciting subject for most , but please stay with me on this!
The failure of Varden Nuttall (and its holding company), a middle ground IVA bulk provider has brought into sharp relief the current system of IP regulation. That and the failure of a number of debt management providers is surely setting off alarm bells within the Insolvency Service and FCA.
Traditionally IPs owned or had a stake in the firm they worked for, and as a result traditional IP regulation always looked at the IP, not the firm, and concentrated on case and not firm management.
Now many appointment taking IPs work for IVA bulk providers, and firms which provide insolvency services, and do not have a financial stake nor any role in the management of the business.
As an outsider looking in (I have never worked for an IVA bulk provider), it seems to me the best of these firms have invested heavily in both systems and staff training and keeping them under review and updated constantly and are very good at what they do. Size appears to be of no consequence, and the biggest may not always be the best, whilst good systems allows many more cases to be handled by fewer well trained people.
IVA bulk providers seem to attract referrals in many ways, but the one which concerns me the most is the referrals from work finders. Are these work finders regulated in any way, and even if they are , are the work finders giving best advice, or are they simply looking for a referral or fact finding fee from the IVA work provider.
The failure of Varden Nuttall and other debt management providers must bring into focus the need to review how IPs and the wider profession are regulated.
Even though we still have a multiplicity of regulators (numbers are reducing) it is time for those regulators to develop a common approach to regulation, and those regulators should not just examine the IP but look at the firm, and where appropriate work finders.
The control of case funds should remain solely with the IP appointed; the IP should have a seat on the board so as to have an input into how the firm is managed. Financial accounts for IP firms and those firms providing debt advice should be produced to a common standard.
To help consumers of insolvency services outcomes should be published, success, modification and failure rates need to be made available.
Finally it is high time serious consideration be given to a single independent regulator to pull all the strands of a diverse profession together.