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Insolvency Law

Expert guidance on all aspects of corporate and personal insolvency

28 JUN 2011

An Insolvent Insolvency Service? £80 million apparently missing from the accounts of the Insolvency Service

I was once informed by a noted retired silk that a cafe that was located within the Insolvency Service (IS) building had to close down due to its own insolvency. According to Private Eye's 'In the City' column, the IS itself seems to be suffering from some severe liquidity issues. In short, it seems that the IS has "a black hole of £80 million." The cause of this funding gap is stated as "years of over-optimistic expectations about the recovery of fees due to the Official Receiver." The £80 million, it is reported, will never be recovered and is being written off. Slicker continues, "it seems that for too long the IS accounts have been continuing to recognise as real fees that it was unlikely to collect or...recover."

Further details on this story will be released in the coming months when the IS's accounts to last March are published. No doubt, Mr Stephen Speed, and the senior management team at the IS will respond to this story in due course. But what will this mean for the IS and general insolvency administration and policy. Will the bankruptcy fee of £1,715 or the company winding up fee of £2,235 have to be put up? As Private Eye note, the IS has already made a number of substantial redundancies of its staff. 

Private Eye has an excellent track record for investigating insolvency issues. In addition to more recent discussion of directors' disqualification, IP self interest, the periodical was also partly responsible for unearthing the liquidity issues of Mr JGL Poulson nearly 40 years ago - see: Tribe, John (2010) The Poulson affair: corruption and the role of bankruptcy law public examinations in the early 1970s. King's Law Journal, 21(3), pp. 495-528. ISSN (print) 0961-5768.  

This news about the IS comes hot on the heels of their recent announcement that they are re-evaluating their functions. The press release notes [my bold emphasis]:

"The Insolvency Service is today launching a six-week consultation with its staff on potentially reshaping the way in which it carries out the bulk of its business and delivers its services going forward. The “Delivery Strategy – Shaping our future” consultation will run from Monday 27 June – Friday 5 August 2011.

In developing the new strategy, with the help of its staff, The Service aims to build a more flexible, efficient and effective organisation fit for the future. And one that is more responsive to the changing needs of its customers and able to fulfil those needs at a lower cost. When The Service needs to see customers face-to-face it will continue to do so; otherwise it is proposed to focus business into fewer, larger regional centres, offering lower-cost services and the prospect of richer career pathways for staff.

The Service is also consulting staff on the option of closing a small number of offices over the next few years. This comes in response to falling case numbers and the subsequent need to drive down the cost of its accommodation estate. If, following this consultation, a decision is taken to close any offices, The Service will launch a full public consultation on the specific proposal.

Having recently conducted a large voluntary exit scheme, The Service has no plans to make any staff redundant as a result of this development.

The Service recognises that any changes to service delivery will impact on key stakeholders and therefore the Delivery Strategy consultation will be shared with some external organisations.

All Insolvency Service staff and its trade unions are being encouraged to participate fully in this consultation. During August the Directing Board will review the responses with the aim of sharing the responses with colleagues and stakeholders in September."

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