Finance and Accountancy Briefing
Accountancy Update – navigating through the storm
Although full figures for 2010 are not yet available, the ranks of authorised insolvency practitioners have increased, so that, for example, by September 2010 the Insolvency Practitioners Association membership had increased from 456 at the beginning of 2009 to 500 by September 2010. Anecdotal evidence also suggests that accountants used to dealing with large mergers and acquisitions in the boom times have been turning their skills to assisting distressed companies and working on large insolvencies. The increased profile and renewed interest in insolvency work is hardly surprising given that in 2010 the Office of Fair Trading (OFT) reported that fees earned by insolvency practitioners in a year are around £1bn for corporate insolvencies. This boom has had other consequences. Although this article can only touch on some of these, they are a reminder of some of the risks facing professional practices and their insolvency professionals.
First, there have been calls for increased regulation, with a particular focus on protecting unsecured creditors. “Pre-pack” administrations which have been the subject of controversy, have already been subject since 1 January 2009 to SIP16, which seeks to encourage transparency. Now the Insolvency Service is consulting on the reform of regulation. These proposals follow the OFT’s June 2010 Market Study on the market for corporate insolvency practitioners. The main recommendations centre on the creation of an independent complaints body, changes to the regulatory structure and amending some of the detailed insolvency provisions, particularly to give unsecured creditors more opportunities to influence the actions of insolvency practitioners. It is envisaged that an independent complaints body would take over the complaints handling functions from the authorising bodies, such as the ICAEW, the ACCA and the Law Society. The new body would have powers to deal with complaints regarding fees (fee disputes currently need to be addressed through the courts). The suggestion is that this would enable minority creditors to make complaints relating to the level of fees charged, even where fees have been approved by the majority of creditors. This move stems, in part, from the OFT’s finding that creditors overpay around £15m in fees each year in the administration process, largely because unsecured creditors may have less power to command lower fees than larger, repeat customers, such as banks.
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