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Parliament: Five recommendations to tame the ‘Wild West’ of the insolvency industry after scandals that have cost suppliers, workers, and tax payers billions

In Westminster, the All-Party Parliamentary Group (APPG) for Fair Business Banking have issued five recommendations to reform the insolvency industry following a number of high-profile scandals.

Sam Alberti of Accountancy Age reported how the APPG had investigated the industry and concluded that lax regulations had allowed for ‘intimidation, deception, dishonesty and even misappropriation of assets, all involving IPs supposedly performing their court-appointed functions.’

They gave examples that included KPMG’s handling of the sale of Silentnight to US private equity firm HIG Capital which allowed to deal to dump the firm’s pension liabilities and the scandal surrounding HBOS Reading, where two directors were involved in misappropriating more that £1bn.

APPG’s five policy recommendations

1 Rules to eradicate a conflict of interest forbidding Ips or insolvency firms to be appointed if they have been interested parties with the insolvent firm within the last two years.

2 A new single regulator with an ombudsman to replace the recognised professional bodies (RPBs), which also oversee the accounting and audit professions.

3 A new Insolvency Code of Ethics on a statutory footing, to enforce rules and punish transgressors.

4 A centralised database recording the outcomes of administrations so the industry can learn from past practices and improve efficiency in corporate rescue proceedings.

5 Rule changes to include barring legislative administrators from discussing or pre-agreeing strategies with appointing creditors, and removing banks’ veto powers, which currently grant the lender the right to choose an IP.

Sam Alberti of Accountancy Age added: “The report also suggests putting the obligation for an IP to seek solvent rescue is put on statutory footing, as well as extending new evaluator process to cover asset sales over £5m. Moreover, the government should re-consider extending the CIGA moratorium to financial contracts and imposing a statutory charge or levy over 5 percent of an insolvent company’s assets.”

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For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk