Insolvency Live E-bulletin

This article seeks to capture those elements of the event which we believe are most relevant to our clients.

If you have any queries or observations from the article, we would be happy to discuss these with you.

We have also attached video links for you to watch the presentations in total.

Chief Executive Officer’s introduction

Dean Beale, the Insolvency Services’ CEO, opened the event and congratulated the Insolvency Service (IS) on how they had managed through the second lockdown.

The IS outlined the successful introduction of:

• The Corporate Insolvency and Governance Act 2020 (“CIGA”), including new Restructuring Plans; and
• the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (“Breathing Space”); and
• the changes to the entry criteria for Debt Relief Orders (“DROs”).

Dean Beale outlined how difficult it will be to predict the growth in insolvencies in the near future and medium term.

The IS’ five-year strategy document was discussed briefly, and a link to that can be found here: 

The Insolvency Service Strategy 2021 to 2026

Personal insolvency reform

Early in 2022, the IS will be launching a consultation on proposed reforms to personal insolvency.

Dr Joseph Spooner from the London School of Economics presented on the consultation, highlighting:

• There would be a Call for Evidence in 2022 to include all personal insolvency procedures.
• The main goals of the consultation are to achieve (1) the optimum creditor/debtor balance, (2) changing debtor behaviour, and (3) getting people into the right product at the right price.
• Other objectives appear to be a reduction on failure rates in Individual Voluntary Arrangements (“IVAs”), removal of inappropriate IVA intermediary services, and taking more control of the point of entry for the debtor, to better regulate the advice sector.
• The introduction of the proposed Statutory Debt Repayment Plans (SDRPs) may lead the push to better control the point of entry for advice.

The video link to this session can be found here: 

Breathing Space (BS)

• The IS team outlined the policy goals of BS and how they have delivered on the new project.
• The exit strategies out of BS will be monitored by Treasury and form part of the wider personal insolvency reform consultation.
• BS legislation will be under constant review and updates will be circulated to ensure clear guidance.
• The take-up on BS has been lower than expected by the Treasury Impact Assessment but that is reflected by lower uptake in debt advice and personal insolvency solutions generally during the pandemic.

The video link to this session can be found here: 

Director Education

Session conducted by Tom Phillips, Assistant Director in the Investigations Directorate and Lynn Oates, Project Manager of the Director Education Project.

The IS process 1,200 – 1,300 director disqualifications in an average year (pre-pandemic) and this number has remained the same for the past decade. The majority are not disqualified through wilful misconduct but through neglect and inaction, i.e. not paying the crown. The IS carried out a survey at the start of 2021, the results being 46% of directors do not fully understand their role or know what their responsibilities are. Therefore, with the correct guidance, the levels of disqualifications could be significantly reduced.

• The Director Education Project is currently at the research and scoping phase.
• The IS traditionally dealt with the consequence of insolvency but are looking to take a more proactive role in the future, working with others to help directors explore additional options rather than being their last resort.
• 5-year strategy to create an agency that is fit for the future and can support businesses to prevent insolvency and rehabilitate through education and guidance.
  • Rationale: prevention delivers better outcomes than a post-insolvency intervention.
  • Commitment: To develop a suite of learning materials for the public and provide a self-assessment toolkit to help directors assess the state of their business and take suitable action if necessary.

Tools to include:

• Company health check to help directors by flagging early indications of distress.
• A range of education and support materials are updated quarterly; generic bite-sized chunks of information and subject-specific material are available publically or via the health check tool.
• Collaborating with directors who have had a failed business to help start again; raising standards of corporate behaviour.

The video link to this session can be found here: 

Customer Focus

The session was opened by Jackie Stevenson-Coe, Assistant Director in the Business Services Division.

• The IS have a 5-year strategy to become a customer-focused agency. The hope is this will increase trust, achieve targets, meet or exceed budgetary goals, reduce risk and boost employee morale.
• They have recently become a member of The Institute of Customer Service and are working towards securing their ServiceMark and ServCheck. The latter baselines employee understanding of customer service.
• A benchmarking exercise with external customers to be undertaken to understand where the IS stand in the industry against other Government agencies and the private sector.

The video link to this session can be found here: 

HMRC enforcement

• The key message was that, if the company engaged, then HMRC would be flexible and supportive, for example on Time to Pay (“TTP”) and Company Voluntary Arrangement approval.
• Enforcement would be a last resort response to lack of engagement and poor conduct, such as paying other creditors ahead of tax liabilities.
• HMRC outlined how they are integrating the “Vulnerability Toolkit” into their training and guidance. Debt Management Vulnerability Toolkit - GOV.UK

The video link to this session can be found here: 

Insolvency statistics and Q&A

Clients will have seen our monthly analysis of the personal and corporate insolvency statistics, now including the latest September edition.

Mazars will be producing a full year’s analysis on the insolvency statistics in the coming weeks.

• The IS team provided some interesting regional and gender statistics.

Q&A:

• The IS Executive Team were asked to give their vision of what the insolvency landscape might look like in 5 years and in 10 years.
• They believed that there would be iterative not radical change
• Personal insolvency reform would be based on simple, digital navigation and access to options in line with similar Gov.UK objectives for citizens generally.
• There would be a single Insolvency Practitioner Regulator.
• Technical enhancements would be introduced.
• Post-Brexit consolidation would be a key objective.
• The UK would have an inclusive and diverse, thriving Insolvency profession.
• There would be little change to the basic principles of the rescue and recovery ideology for corporate entities.
• A goal to achieve enhancement of data analytics for early warning and quicker intervention for corporates.
• No change to the basic principles for personal insolvency – those that can pay, should pay
• Those that cannot pay would have easy access to cheap exit solutions.

Other interesting items:

• Bounce Back Loan and CBILS fraud and director disqualification following company dissolution is high on the IS agenda.
• Personal Insolvency Reform timetable –
  • Statutory Debt Repayment Plans (“SDRP”) – consultation and call for evidence early 2022
  • Regulations through Parliament late 2022
  • Go Live 2024 Q2
• SDRP’s to “fill a gap in the market for credible, IVA/DMP protection”
• Measures in the meantime to keep the pressure on lead generation and advertising of IVAs.
• Failure rates by IVA provider to be made public.
• Overall, the key takeaways were that there appears to be no appetite to drastically change the landscape, only an ambition to improve it and remove the rogue elements from the IVA market.

The video link to this session can be found here: