On 12 September 2023, the government published its long-awaited response to its consultation on the future of insolvency regulation.
The reforms will introduce:
- Firm regulation: A new framework for the authorisation and regulation of firms providing insolvency services (as well as individual insolvency practitioners (IPs)).
- Public register: A mandatory public register of authorised IPs and firms providing insolvency services, that will include details of regulatory sanctions made against them.
- Standard setting: Ethical and technical standards to be set by the Secretary of State in collaboration with experts from the sector and the four Recognised Professional Bodies (RPBs).
- Bonding regime: A strengthened bonding framework to include an increase in cover and run-off cover for a minimum of two-years after an IP has left office. Wider reforms will be the subject of further consultation.
- Compensation scheme: A new compensation scheme although the government acknowledges that this requires further consultation.
No change (for now):
- A single regulator within the Insolvency Service won't be created (although will remain under review). The government will work with the RPBs to deliver "measurable improvements" to the quality of regulation through non-legislative means.
The RPBs have generally welcomed the reforms, which will increase regulatory coverage and offer better protection and transparency for the users of insolvency services. More details on the proposed changes are needed to see how they will work in practice but it is likely to be some time before we see legislation to implement the reforms, which will be introduced when Parliamentary time allows.
Find out more
To discuss the issues raised in this article in more detail, please contact a member of our Restructuring & Insolvency team.