On 21 December 2021, the UK government launched the future of insolvency regulation consultation, proposing significant changes to insolvency regulation which it says 'has not kept pace with developments in the insolvency market.'

Currently, the UK's insolvency practitioners are regulated solely as individuals, with no specific regulation of firms offering insolvency services 'creating the potential for conflict between the interests of the firm and the statutory duties of the IP.' The current regime is also 'top-heavy', with four membership bodies and the government all involved in regulating less than 1,600 individuals.

Key proposals

The main proposals in the consultation include:

• a single independent government regulator to sit within the Insolvency Service
• regulation of all firms and individual IPs
• a public register of authorised IPs and firms with details of any sanctions imposed
• a formal compensation scheme
• limited reforms to the IP bonding regime.

Next steps 

While the government's plans to modernise regulation of the sector have been welcomed, concerns have been raised by the insolvency practitioners' trade body, R3 about the potential for a serious conflict of interest if a single regulator were to operate from within the Insolvency Service.

The government is seeking written responses to the consultation by 25 March 2022. But it is likely to be some time before these changes are implemented as the proposed reforms would require new legislation to be introduced.

Find out more

To discuss the proposals in more detail, please reach out to a member of our Restructuring & Insolvency team.