Vince Cable and BIS announcements – R3 responds
Director disqualification, fees, and pre-packs
Responding to announcements from the Department of Business, Innovation, and Skills, and Vince Cable on director disqualification and other topics, Liz Bingham, president of insolvency trade body R3 says:
“We welcome the proposals on seeing more culpable directors disqualified. R3 has called for more resource in this area for some time to ensure that the number of disqualifications can keep pace with the number of reports that Insolvency Practitioners submit on the conduct of a director in an insolvent business.”
“We believe that streamlining the reporting process will improve disqualification rates. We also welcome widening the criteria for recommending a director’s disqualification. It is encouraging to see that BIS is proposing to allow other regulators, such as the Financial Conduct Authority, to disqualify directors too. This would share the workload.”
“We are also pleased to see that BIS is considering steps that could see directors that acted fraudulently or negligently personally compensate creditors. However, this might be seen as a case of the right hand of government not being aware of what the left is doing. Insolvency Practitioners already play a key role in pursuing delinquent and fraudulent directors on behalf of creditors: this is under threat by the Ministry of Justice’s ‘Jackson’ proposals for legal aid reform.”
“The MoJ has recognised that Insolvency Practitioners can obtain significant redress for creditors and has granted Insolvency Practitioners a temporary exemption from the Jackson reforms. It is vital that this exemption is made permanent. BIS should help make the case for this to happen.”
“We have previously called for a programme of education for disqualified directors, so it is encouraging that BIS provides for this in its proposals. It is important that the UK insolvency regime does not have a negative impact on business creation.”
“We need to recognise that directors can and do make mistakes but that, in many cases, this is more about naivety and inexperience than deliberate wrongdoing. It is entirely appropriate that, after a period of education, such individuals should be given the chance to re-enter the business world.”
“We welcome the conclusions from Professor Kempson’s review and agree that at the heart of the fees debate is the issue of creditor engagement. As Professor Kempson has found, creditors can have considerable influence on fees when they engage in the process. The challenge for government and the profession is to make it easier for this engagement to take place.”
“We agree with Professor Kempson that HMRC and other government departments, as repeat unsecured creditors, have an important role to play in insolvency cases. We have continued to call for greater HMRC involvement in insolvency cases, and agree that extra resources should be made available to HMRC and other government bodies to allow greater levels of engagement.”
“While there is no quick fix, there are changes that can be made to make engagement less onerous for creditors, including new reporting requirements for Insolvency Practitioners or improved creditor engagement opportunities.”
“Such changes could be achieved through amending existing guidance and requirements for Insolvency Practitioners set out by the Insolvency Service, as well as looking at the monitoring and enforcement approaches of the profession’s eight separate Recognised Professional Bodies.”
“We recognise that there are creditor concerns over the transparency of pre-packs, but we believe – and evidence has shown – that pre-packs can be a successful tool for rescuing businesses and protecting jobs.”
“We look forward to contributing to the government’s review and hope that the final proposals can help to increase the confidence of the creditor community in this successful rescue tool.
For more information, please contact:
Nick Cosgrove, Communications Manager R3
0207 566 4215
Victoria Jonson, Director of Communications R3
0207 566 4223
Notes to editors (R3):
- R3 is the trade body for Insolvency Professionals, and represents 97% of the UK’s Insolvency Practitioners.
- R3 comments on a wide variety of personal and corporate insolvency issues. Contact the press office, or see www.r3.org.uk for further information.
- R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by one of nine recognised professional bodies.
- R3 stands for ‘Rescue, Recovery, and Renewal’ and is also known as the Association of Business Recovery Professionals.