Are insolvency practitioners regulated

Are insolvency practitioners regulatedYes, Insolvency Practitioners are authorised and regulating in Great Britain by The Secretary of State for Business, Innovation, and Skills who  holds the primary responsibility for insolvency policy in Great Britain, which includes England, Wales, and Scotland.

The Insolvency Service, specifically its insolvency practitioner policy section, manages the insolvency framework daily on behalf of the Secretary of State.

While the Northern Ireland Assembly oversees insolvency policy and laws in Northern Ireland, it closely mirrors the system in Great Britain

Insolvency practitioners and the recognised professional bodies

The Insolvency Act 1986 empowers the Secretary of State to identify specific independent entities, termed as recognised professional bodies (RPBs), to authorize their members to function as insolvency practitioners.

Only these practitioners are legally permitted to serve in insolvency roles such as trustees in bankruptcy, liquidators, administrators, administrative receivers of firms, and supervisors of both Individual and Company Voluntary Arrangements.

The Insolvency Service oversees the RPBs to guarantee that the practitioners they authorize are competent. While RPBs are autonomous and establish their membership criteria, they must ensure their members fulfill standards regarding education, training, and experience. The obligations of the RPBs are documented in a “Memorandum of Understanding”, which signifies the accord between the RPBs and the Secretary of State.

A pivotal criterion is that candidates must clear the Joint Insolvency Examination to become insolvency practitioners. Additionally, when serving in their role, they are mandated to maintain a ‘bond’, essentially an insurance, to cover potential claims arising from fraudulent or dishonest actions.

All practitioners undergo routine assessments by their authorizing entities, which include the Insolvency Service and the RPBs, at least once every six years or more frequently if deemed necessary. These evaluations ensure practitioners’ compliance with laws, accepted standards like the Statements of Insolvency Practice (SIPs), the Insolvency Code of Ethics, and the regulations of the authorizing entities.

The Insolvency Service conducts regular inspections of each RPB, typically once every three years, to confirm adherence to the Memorandum of Understanding. Non-compliance by any RPB may lead to a review by the Secretary of State, potentially resulting in the revocation of its RPB status. Given its role in supervising the RPBs, the Insolvency Service is often viewed as the “watchdog of watchdogs”.

Complaints procedures

Complaints regarding the professional conduct of an insolvency practitioner are primarily addressed by their authorising entity. While the Insolvency Service reviews complaints about the RPBs, its focus is on determining if the RPBs have adhered to their complaint procedures. It does not re-examine complaints about individual practitioners, ensuring only that the procedures are sufficient.

It’s crucial to understand that typically, only issues tied to professional behavior are reviewed. The sole authority that can affirm, overturn, or alter a decision made by an insolvency practitioner is the court. Neither the Secretary of State, the Insolvency Service, nor the practitioner’s RPB possess this power.

If an RPB upholds a complaint, it determines the appropriate sanction. Potential penalties encompass:

  • Imposing a fine
  • Limiting the practitioner’s license
  • Revoking the practitioner’s license

If the Secretary of State upholds a complaint against a practitioner they’ve authorized, it could lead to the revocation of the practitioner’s license.

If a complaint is dismissed and the complainant remains discontented, certain RPBs offer a mechanism to escalate the complaint to an impartial complaints reviewer.

Other principal bodies

The Joint Insolvency Committee (JIC) serves as a primary platform for discussing matters pertinent to the insolvency profession. It comprises representatives from all the RPBs and the Insolvency Service. The JIC’s primary focus is on setting professional and ethical standards and ensuring uniformity within the profession.

  • The Insolvency Practices Council (IPC) – delves into the ethical and professional standards of the insolvency sector. It forwards suggestions to professional representative bodies and offers recommendations for their review. The IPC also evaluates the adoption, adherence, and enforcement of these standards. Its operations are financed by a levy imposed on the authorising entities, which they subsequently recoup from the insolvency practitioners they license.
  • The Association of Business Recovery Professionals – commonly referred to as R3, functions as the industry association for insolvency practitioners. R3 communicates its members’ perspectives to the government and media outlets. It provides guidance to its members on insolvency regulations and practices. To cater to its members’ ongoing professional education requirements, R3 arranges various courses, conferences, and events. Additionally, R3 compiles and disseminates data on corporate recovery and individual insolvency.

List of regulatory bodies

Regulated Insolvency Practitioners are overseen by one of these entities:

  • The Institute of Chartered Accountants in England and Wales, commonly known as “ICAEW”.
  • The Insolvency Practitioners Association, referred to as “IPA”.
  • The Insolvency Service.

To verify if an individual is regulated by any of these bodies, you can visit the respective regulator’s website and search for the member’s name.

All regulated Insolvency Practitioners adhere to a specific code of ethics and are required to follow the Insolvency Act and the Statements of Insolvency Practice.

Every three years, these practitioners undergo an evaluation by their respective regulators to ensure the standard of their work.

Additionally, Insolvency Practitioners must possess a bond from a regulated insurance provider. This bond safeguards the assets that the Insolvency Practitioner manages.

Steve Jones Profile
Insolvency & Restructuring Expert at Business Insolvency Helpline

With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.