On 14 September 2021 the All-Party Parliamentary Group for Fair Business Banking (the APPG) released its report Resolving Insolvency: Restoring Confidence in the System.
In this report the APPG outlined its findings on perceived issues with the current insolvency regime. In light of these findings, it has proposed five changes that it believes could be made to improve confidence in the insolvency process:
- Insolvency Practitioners (IPs) should be prevented from taking insolvency appointments where they have given advice to an interested party in the preceding two years;
- The establishment of a single regulator and an independent ombudsman for IPs;
- Making the Code of Ethics for IPs a statutory instrument;
- The development of a centralised database recording the outcomes of all insolvencies; and
- What the APPG terms "further rule changes in support" of these changes.
The APPG argues that these changes would reduce the potential for conflicts of interest in IP appointments, and ensure that those that become involved in insolvency processes are better able to seek redress for any complaints that they have.
The most dramatic of these proposed changes is the restrictions on IPs from taking appointments where they have previously given pre-appointment advice (although the APPG did not give any guidance on who would be considered an "interested party"). However, some of the other proposals are also significant. The creation of a single regulator and ombudsman would represent a substantial restructuring of the current regulatory regime. Meanwhile, the proposal to put the Code of Ethics on a statutory footing, with statutory rights for shareholders and directors to rely on breaches to bring claims against IPs, would potentially open another route for claims against IPs. Finally, the proposed supporting rule changes include some potentially significant revisions to the current regime. In particular, the APPG has suggested introducing requirements that IPs do not discuss strategies with creditors in advance of appointment, and removing Qualifying Floating Charge Holders' right to select which IP is appointed in any given insolvency.
It remains to be seen whether the Government will take up all or any of these proposals. Given that significant changes to insolvency law were introduced just last year by the Corporate Insolvency and Governance Act 2020, and the ongoing disruption caused by the Coronavirus pandemic, it may be that there is little immediate appetite to do so.
However, if they are implemented, these proposals could potentially have a dramatic impact on insolvency and restructuring in England and Wales. We will be watching developments with interest.