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24/01/2014

Government decision to press ahead with partial licensing plan worrying, says R3

  • Proposals in Deregulation Bill add regulation to insolvency profession
  • Partial licences would have negative impact on SMEs
  • R3 concerned Government is jumping the gun on just-launched consultation

The Government’s decision to include proposals for ‘partial licences’ for insolvency practitioners in the Deregulation Bill risks confusing businesses seeking advice and will add red tape to the profession, says R3, the insolvency trade body. 

The Deregulation Bill received its first reading in parliament yesterday; a second reading takes place on Monday 3 February. Partial licensing will introduce two new types of licence to allow insolvency practitioners (IPs) to work on either purely corporate or purely personal insolvency cases.

As recommended by a committee of MPs and peers that examined the original proposals, a consultation on partial licences was also launched yesterday – shortly after the proposals were put to the House of Commons.

The insolvency profession is concerned that partial licences run the risk of:

  • Confusing owner-managed businesses;
  • Adding Red Tape for IPs and their regulators;
  • And partially licensed IP’s not recognising key insolvency issues when giving advice.

Giles Frampton, R3’s vice-president says: “Partial licences do not belong in a Deregulation Bill. They will add regulatory burdens to firms and regulators who have to ensure their IPs are compliant with an already complicated regulatory structure. This is likely to increase rather than decrease costs.”

The profession is also concerned that partial licences will make it harder for entrepreneurs – many of whom will have given personal guarantees or other undertakings to secure business funding – to receive appropriate and comprehensive advice from IPs.

Giles Frampton adds: “Partial licences could prove confusing for the businesses, individuals, and entrepreneurs that turn to IPs for advice. They need to know from the start that an IP will be able to help with all their problems.”

“It’s difficult for an IP to judge if the case is purely corporate or personal until they have actually been appointed. Only a thorough examination by a fully qualified IP will properly identify the issues.  Because knowledge of both corporate and personal insolvency matters is frequently necessary when advising clients, the savings may prove to be illusory.  Alternatively if the training is limited, the advice is likely to be correspondingly restricted.  Either way it will be financially struggling businesses and individuals that lose out.”

“We understand that the Government is keen to increase competition and reduce costs, but partial licences are simply not the way to do this. The benefits of the Government’s proposals are dwarfed by the drawbacks.”

R3 is concerned that the Government’s consultation on partial licences has been launched after the publication of the Bill.

Giles Frampton says: “These proposals have yet to be properly consulted on, so it is disappointing to see them already in the Bill. Hopefully, the Government will listen to the profession and amend the Bill once the consultation is complete.”  

Notes to editors:

  • R3 is the trade body for Insolvency Professionals and represents 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 recognised professional bodies
     
  • R3 stands for 'Rescue, Recovery, and Renewal' and is also known as the Association of Business Recovery Professionals.