The Insolvency Practices Council 10th Annual Report - more constructive critique from the IPC
The Insolvency Practices Council (IPC) has been mentioned on this blog on a number of previous occasions (e.g. here). The IPC are keeping up their sterling work monitoring the insolvency industry and recommending policy areas for consideration. This is evidenced by their latest report which has just been published. Entitled, "2000-2009 Tenth Annual Report - Insolvency Practices Council" the document contains a thorough exposition of the IPC's activity over the last year and over the last decade. This makes the document all the more interesting for this round up of policy movements and debates over the last ten years. The document also mulls on the future direction of insolvency policy, perhaps hoping to provide a "token of a better age."
I will pick some highlights for consideration for this blog entry. After mulling on the huge increase in redress to the personal insolvency laws the IPC recommend that: "There should be a single lead government department responsible for policy making on personal indebtedness and insolvency." This is a very interesting and critical point. As I have noted elsewhere, it does seem strange that both the Insolvency Service (IS - who should be the "lead department") and the Ministry of Justice have dominion over this area. This must lead to confusion in policy formulation. The recent changes to the County Court Administration regime and the introduction of the DRO procedure highlights the issue. To what extent did the two departments liaise? Was there are discussion of how these possibly competing remedies might sit together on the smörgåsbord board of personal insolvency solutions? This is an important area and there is no room for fiefdoms.
A second personal insolvency recommendation comes from the IPC, namely, they press for more research on why IVAs fail. An outstanding piece of scholarship by KPMG's Sue Morgan already exists on this topic. As someone who has conducted a major piece of empirical research which examined the bankrupt debtors view of the system, I am pleased to note that the IPC call for similar work on IVA failure. Perhaps Sue Morgan's work on this area could be expanded to take account of this call from the IPC.
On the corporate side of the subject the IPC consider that the system is "broadly satisfactory." This must be a welcome relief to the profession as they have been coming in for a certain amount of pillorying of late (see here for an example of negative comment) in relation to, inter alia, the efficacy of pre-packs, fee levels, and the plight of unsecured credits (see the OFT investigation here). Summarising the IPC note, "Overall, we do not consider major changes are needed in the UK's corporate insolvency system, which ranks well compared with other developed countries in terms of recovery for creditors..." I would agree save for my proposal on CVA extension to large companies (when is the IS going to publish the final consultation document on this area by the way?). The OFT should be mindful of the IPC's view when they come to report. We must not damage confidence in the UK corporate insolvency system, indeed, we must encourage further use. The recent "Bankruptcy Brothel" point could be put another way, i.e. we are encouraging a form of Delaware effect in relation to our insolvency laws - this is no bad thing surely?
There is much more substance in the report than can properly be discussed in this brief blog entry. There is certainly much "food for thought" as the chairman suggests. I recommend that all blog readers obtain a copy of the document as it is most instructive in a number of ways. I will re-visit issues raised in the IPC report in more depth once I have mulled on the document a bit further.
Congratulations to the IPC for ten years of constructive critique and analysis. Pages 13 to 17 of the report show how the various IPC recommendations have been dealt with over the last ten years and how much they have contributed to insolvency policy and debate. The sector should be pleased to have such a 'think tank' operating in the field. I do hope the IPC have had a nice celebratory dinner to congratulate themselves on their hard work over the last decade, all of which is undertaken with only a minimal honoraria.
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