Annual Report 2005 Contents

Following the steep increase in personal indebtedness the Insolvency Practices Council’s main focus during 2005 was on personal insolvency. This Annual Report makes four recommendations to the insolvency profession and its regulators, which are set out in detail on pages 7 to 10 of the Report. In summary they are as follows:

• That Insolvency Practitioners (IPs) should give personal debtors written “best advice” on all the options available to them whenever Individual Voluntary Agreements (IVAs) are being considered. This is increasingly important following the entry into force of the Enterprise Act 2002, which makes bankruptcy a better option for some debtors. We have come across evidence that IVAs are being inappropriately recommended, albeit in a small number of cases, to debtors whose only financial resources come from social security benefits; v That the Insolvency Service (IS) should take steps to improve the statistical information available on the success or failure and the financial outcomes of IVAs to enable the regulators better to monitor the performance of the IPs they license in setting up and supervising IVAs;
• That IPs and their Recognised Professional Bodies (RPBs) should, as a matter of good practice, be expected to send substantive or, if necessary, holding replies within 10 working days of receiving any correspondence from creditors, debtors and other members of the public. The Joint Insolvency Committee (JIC) should write this target into its ethical code and consider with the RPBs taking steps to discipline IPs who persistently fail to meet this target;
• We support proposals to set up Simplified Individual Voluntary Agreements (SIVAs). We further recommend that there should be a simplified fee structure for SIVAs. As regards fees for corporate insolvency work, we recommend that the regulators should monitor IPs’ compliance with their new obligations to provide sufficient information about the work they have done to enable their creditors and the courts to assess their value for money and effectiveness.

During 2005 the IPC also responded to two consultation documents issued by the IS. The first set out proposals for a simplified IVA put forward respectively by an IS working party. The IPC generally supported these proposals, but expressed concern that they did not adequately protect the interests of creditors. Our response therefore recommended that formal approval by creditors be required for all IVAs and also on any decision on whether bankruptcy proceedings should be initiated when a SIVA fails.

The IS also consulted on proposals to introduce simplified Debt Relief Orders (DROs) to grant debt relief to personal debtors with insufficient income or assets to make any repayment of their debts. Our response argued that these proposals needed amendment to provide stronger protection against fraud. We also expressed concerns as to whether the proposed voluntary organisations would have adequate resources to carry out the checks on the eligibility of DRO claims, as envisaged in the Government’s proposals. Here again the IPC proposes that adequate safeguards and monitoring should be put in place.

The IPC had regular meetings with the Joint Insolvency Committee (JIC) and attended the latter’s first Regulatory Forum which addressed issues such as industry intelligence, co-operation on monitoring IPs and consistency in disciplinary procedures between RPBs. The IPC recommends that the Regulatory Forum becomes a regular event.

At the end of the year two lay members of the IPC, Robert Bertram and Roger Page, and one practitioner member, Peter Horrocks, retired. The Secretary of the IPC, David Harrison, also retired and has been succeeded by Mike Stancombe.

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