Annual Report 2006 Contents

This Annual Report makes four recommendations, three of which are addressed to the insolvency profession and the Recognised Professional Bodies (RPBs) which regulate them or to the Insolvency Service (IS) and one to the Government. They are set out in full along with the reasons for them on pages 7-10 of the report. In brief, they are: -•

Individual Voluntary Arrangement statistics
The IPC welcomes the intention of the Insolvency Service (IS) to provide the RPBs with quarterly statistics, showing the completion/failure rates of Individual Voluntary Arrangements (IVAs) for individual IPs acting as Supervisors. The RPBs should use this information to monitor the performance of their IPs and to seek explanations from those IPs whose failure rates are significantly above the national average. The RPBs and the IS should consider publishing the completion/failure rates of IVAs by individual IPs. The IS should seek to remove the legal obstacles to collecting regular electronic data on the financial outcomes of individual IVAs and should then as soon as possible make this data available to the RPBs to facilitate effective monitoring.

Pre-packaged administrations
The IS and the RPBs should require IPs acting as Administrators of insolvent companies to report promptly to the full body of creditors when they have executed a pre-pack sale of the insolvent business. The reports should give creditors a reasoned explanation of why the IP decided not to advertise the business on the open market and why doing so would have been detrimental to obtaining a better price for the sale of the business. The RPBs should remind their IPs of the potential for conflicts of interest in relation to pre-packs, if they accept an appointment as Administrator having previously advised the directors, or managers of the insolvent company or connected third parties on the option of a pre-pack. There should be full disclosure by IPs of any potential conflicts of interest in their reports to creditors; the RPBs should monitor this.

Reports under the Company Directors Disqualification Act 1986
The IPC considers that the Government’s action in cancelling a substantial number of the investigations planned under the CDDA in 2006/2007 is damaging to the public interest, because it materially weakens the protection of the public in general and creditors in particular. The IPC urges the Government to remove as soon as possible the restrictions on investigations it announced in December and to provide sufficient funding to allow the DTI to investigate all adverse reports.

Correspondence between the IPs/RPBs and Debtors/Creditors
As recommended in previous IPC Annual Reports, the RPBs should give guidance to their IPs that, as a standard of good practice, they should reply to all correspondence from debtors, creditors or the general public within 10 working days.

If a substantive reply cannot be given within that period, a holding reply should be sent, indicating when a substantive reply will be sent. The RPBs should also monitor performance against this standard so that, if necessary, disciplinary action can be taken against those who persistently fail to meet the standard and thereby may bring the profession into disrepute.

During the year the IPC responded to consultation documents concerning the Memorandum of Understanding and Principles for Monitoring issued by the IS, a revised Code of Insolvency Ethics issued by the Joint Insolvency Committee (JIC), the Department of Constitutional Affairs’ Draft Tribunals, Courts and Enforcement Bill and proposals from the IS for consolidating secondary insolvency legislation. IPC members also visited Scotland to discuss the implications of the Bankruptcy & Diligence Bill then being considered by the Scottish Parliament.

IPC members had several discussions with representatives of the JIC about its recommendation that documented appropriate advice to be given to debtors considering IVAs and on the risk of misselling IVAs to debtors on low incomes. We were pleased to see that our recommendations were taken fully into account in a revised Statement of Insolvency Practice Number 3.

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