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LASPO exemption and a period of stability is top of insolvency profession’s new Government wish-list

A permanent exemption for insolvency litigation from the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act and a period of stability to assess the impact of previous insolvency reforms are at the top of insolvency trade body R3’s wish-list for new insolvency minister the Rt. Hon. Anna Soubry MP.
Andrew Tate, R3 vice-president, says: “The UK’s insolvency profession is a crucial part of UK plc. It’s very important that the impact of any legislation on insolvency is thought about carefully and that maintaining our successful system that supports business rescue, financial rehabilitation, and debt repayment is a key consideration in policy development.”
“Even with the return of sustained economic growth, insolvency issues will not disappear. The profession will still be required to help rescue businesses and help indebted individuals back to their feet; and they need an effective set of tools at their disposal to do so.”
Insolvency litigation’s exemption from the LASPO Act helps insolvency practitioners reclaim £160m per year from rogue directors that is owed to taxpayers and businesses.
In February 2015, Justice minister Lord Faulks QC postponed a planned April 2015 end to the exemption and said the government would reconsider the issue ‘later in the year’.
Andrew Tate says: “A huge amount of money is at stake for creditors, and were the government to end the exemption it would send a very poor signal.”
“Without an exemption from LASPO it will be much harder for the insolvency profession to get a good deal for creditors. And it will be much easier for rogue directors to keep hold of money that does not belong to them. The future of the exemption should be subject to a proper government review and not blindly follow the policy set for other, quite different sectors.”
Meanwhile, the previous twelve months have seen an unprecedented number of changes to the insolvency regime, including changes to creditor meetings, director disqualification, insolvency fees, pre-packs, and regulation.
Andrew Tate says: “Many of the changes will come into force this October and will have far reaching implications. While there are some areas where the insolvency profession may continue to call for improvements to legislation, we would ask the government to avoid embarking on any major new insolvency changes for the foreseeable future to ensure that the changes already made are implemented properly and their impact reviewed.”
Two areas where R3 would like to see further changes are to the personal insolvency regime and the insolvency profession’s opportunities to tackle fraud.
Andrew Tate adds: “The last parliament saw some personal insolvency reform, but there are extra, simple steps to take that the insolvency profession would support. For example, we would like to see the length of the bankruptcy term vary depending on the bankrupt’s prior behaviour. And we would like to make bankruptcy easier to access by allowing the up-front £705 court and administration fees to be paid in instalments.”
“Another area where change would be welcomed is on fraud.  Fraud is a major problem within the UK economy and the insolvency profession has some powerful tools to tackle it. However, these tools can only be used in insolvency situations. There is plenty of scope for the government to increase the insolvency profession’s opportunities to use its powers on behalf of creditors and the wider economy.”


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 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.