Insolvency Practitioners to be Independently Regulated – About Time

Last week, the Office of Fair Trading (OFT) released a report criticising the insolvency industry and calling for the establishment of a complaints body to regulate practitioners.

The report found that, on average, insolvency practitioners (IPs) earn fees of up to 20pc of the assets available when firms are wound up. A large part of the remaining 80pc is normally paid to secured creditors (banks, lenders and finance companies).

Preferential creditors, such as employees, are generally paid after secured creditors and given priority over unsecured creditors such as small businesses, customers, and the taxman, who nearly always end up with nothing.

Legally, secured creditors must be paid first. IPs are only accountable to secured creditors so it’s not unusual for the two to exclusively decide how much can be realised from a debtor’s assets to pay the secured creditor.

Normally, the remaining balance is collected by the IP as a fee.

IPs have operated like this – in a self-regulated industry – since 1986, and it’s unfair. An independent watchdog is absolutely welcomed.

It’s worth noting that insolvent companies are not obliged to use IPs for their liquidation, Company Voluntary Arrangement (CVAs) or Pre Pack Administration process.

The law states that you must stop trading, and prevent further loss to your creditors when a business becomes insolvent. But it does not say you must go to an IP and this is especially the case for small businesses. There are less expensive options available.

Posted in

Commercial Debt Collection: Challenges and Best Practices


Commercial debt collection is the process through which outstanding debts owed by commercial entities are recovered, typically stemming from goods delivered or services rendered on…

Read More

Gibraltar Financial Services Commission: A Lesson in Financial Regulation


The recent collapse of High Street Group and its security trustee, Castle Trust Management and Services, prompts a closer examination of regulatory practices. Along with…

Read More
de trafford

De Trafford Third Party Recovery: An Update


The recent financial collapse of multiple DeTrafford property development companies hassignificantly impacted purchasers. As they navigate the consequences, a glimmer of hope arises asthe wheels…

Read More
Northumberland Living

Northumberland Living Developments: Allegations and Challenges


Northumberland Living, In West Chevington Farm, Druridge Bay, is a development poised for completion. Only to be stalled by an apparent unforeseen historical conveyancing issue.…

Read More