Please select a page from the Report Members of the Insolvency Practices Council Chairman's Report Review of Activities during the year Personal Sector Issues Commercial Sector Issues General Issues Future Plans Progress of Recommendations 2000, 2001 Recommendations Glossary Acknowledgments

Chairman's Report

The Insolvency Practices Council (IPC) has now been in existence for nearly three years. Its remit remains to examine the insolvency profession's standards and practices and to make
recommendations for change if it thinks change is needed. It interacts with the profession mainly through regular liaison with the Joint Insolvency Committee (JIC) on which the professions' regulatory bodies are all represented together with the Department of Trade and Industry, Insolvency Service (IS). In our first Annual Report, two years ago, we made three recommendations for change.

1. The JIC should consider strengthening the statement of best practice to ensure that, where an Individual Voluntary Arrangement (IVA) is being considered, the Insolvency Practitioner (IP) should give the debtor a written explanation, signed personally by the IP, of all the options open to the debtor, with an indication of the relative advantages and disadvantages of each.

2. The JIC should consider setting a standard of best practice to ensure that IPs keep
debtors/creditors informed in a meaningful way of what is happening and that correspondence
from debtors/creditors should be answered within at least 10 working days. If this is not possible, then a holding acknowledgement should be sent explaining the position and stating when a substantive response might be expected.

3. The JIC should consider setting a standard of best practice, which would reduce the uncertainty and unfair treatment that is sometimes evident in the disposal/realisation of the equity in the Matrimonial Home in the case of the bankruptcy of the sole or joint owners.

Last year I noted that the profession had accepted these recommendations in principle and that progress was being made to put them into effect. This year I am delighted to report that all three have been implemented in one form or another as set out on page 13. We made four further recommendations in our second Report this time last year.

1. Any IP whose IVAs show a high rate of failure at an early stage should be the subject of an
investigation by his/her Recognised Professional Body (RPB) including the source and type of
introduction and benefits received. The JIC should also look at the possible conflict of interest
where the supervisor of a failed IVA is subsequently appointed the trustee in bankruptcy.

2. Monitoring units of all the RPBs need to be properly and effectively resourced to maintain the high standards expected from the profession if self-regulation is to be maintained. The JIC should look into the effectiveness of the various monitoring bodies.

3. We recommend that the IPs should give a clear indication in writing in advance of the likely costs and charges especially in relation to IVAs.

4. We recommend that the RPBs give urgent consideration to seeing what can be done to simplify and speed up the regulatory processes. We also recommend that the Insolvency Service should cease to licence IPs directly, as in our view, this role is inconsistent with its role as Regulator of Regulators.

Again, I am pleased to report that the profession has responded positively to these recommend-ations (see page 13). But the IPC is not solely about making specific recommendations. It also has a wider ranging concern to understand the issues currently facing the profession and those who have dealings with it.

We have, therefore, maintained contact with a wide variety of those who rely upon, or deal with insolvency practitioners, including the judiciary, the banks, the Institute of Credit Management and the National Association of Citizens Advice Bureaux. In addition, members of the Council have attended two meetings of the Inland Revenue/Customs & Excise Voluntary Arrangements User Group. We are most grateful to all those bodies and individuals who have given time and trouble towards helping our understanding of the relevant issues.

We have also continued to take opportunities to talk to IPs at various fora. In particular, we
attended and made a presentation at the R3 Smaller Practices in Insolvency Conference in
Coventry in September. We have also had meetings with local IPs in Belfast and Birmingham. In all, during the three years of the Council's existence, we have met IPs in no less than eight
locations as illustrated by the map on Page 8. Further meetings with local IPs in East Anglia,
Hampshire, the North West and South Yorkshire are planned for 2003.

In 2002, we held eight Council meetings (seven in London and one in Birmingham). These have covered a wide range of issues as indicated in the main body of the Report. Among the most important have been: the potential for conflicts of interest where legal and accountancy firms within a linked network act together in an insolvency; continuing unease about some IVAs when bankruptcy would appear to be a better option; and the handling of complaints by the RPBs.

We have also kept in touch with the Accountancy Foundation Review Board whose remit to look at the ethical and professional standards of accountants had obvious interactions with our own, given that many IPs are accountants of one kind or another. The recent DTI Review of the Regulatory Regime of the Accountancy Profession envisages bringing all the various review bodies together under the aegis of the Financial Reporting Council. We will continue to keep in touch with developments in this area.

I would like to take this opportunity of stating clearly that we believe from all the evidence available to us that the majority of IPs carry out their duties in a responsible and highly professional manner in what are, by the nature of things, often very difficult circumstances. We remain concerned, however, that there are occasions when this may not be successfully achieved, especially when those with whom they are dealing are individuals who are unaware of insolvency rules, worried and therefore vulnerable. Our continuing concern with IVAs and other personal debt areas reflects this aspect of practice. We shall be equally alert to scrutinise potential problems in the corporate insolvency field. This is an area where issues surrounding fees and costs are particularly likely to arise as recent judicial comment has noted.

Turning to other issues, we believe, as I said last year, that the number of licensing bodies for Ips - 9 in all - is not helpful for the image of the profession, especially bearing in mind the small number of insolvency practitioners. We continue to think that some reduction would be desirable; and our view is reinforced by the fact that in our discussions with IPs we have been struck by how many of them also think this. We recognise, however, that these things are not easy to change and that what matters is that the system should work and work well. In this context, we greatly welcome the steps which have been taken to improve the workings of the JIC and to enhance the co-operation and harmonisation between the various RPBs. One area where we have said that greater co-operation between RPBs would be desirable is in relation to complaints handling. The recent announcement of the setting-up of a joint complaints contact number by the Insolvency Practitioners Association, Institute of Chartered Accountants in England & Wales and Association of Chartered Certified Accountants together with the Insolvency Service is in our view a useful step and one which we are pleased to support.

Nothing is ever perfect and there is always room for improvement. Nevertheless, there has
undoubtedly been progress recently in improving the ethical and professional standards applying to IPs, for instance the revision of SIP 9 and the issue of the booklet 'Is an IVA right for me?', to which, we believe our recommendations have contributed. Against this background, whilst we shall continue to monitor developments carefully and critically, but also constructively, we are not this year making any formal recommendations for change other than to urge the profession to devote resources to collecting more statistics about various aspects of Individual Voluntary Arrangements and publishing them.

One new development of 2003 of which IPs will already be aware is that they will in future, as was intended from the outset, have to pay for the cost of the IPC directly. Of course no one welcomes the extra cost of £32 per licence holder, but we hope that the IPC's work will be seen as helpful and beneficial to the profession as well as to the public, particularly if, as seems likely, there is a rise in personal and commercial debt problems in the next few years with consequently greater public and newspaper interest in the subject. The fact that there is an outside body scrutinizing the insolvency profession's activities, may help the profession to ward off what can sometimes be ill-informed criticism and strengthen public confidence in it. That said, the Council's primary remit remains to ensure that the public interest is properly reflected in the regulation and standards of the profession.

G E A Kentfield
Chairman

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