Shining a spotlight on current complaints aimed at the insolvency industry

Shining a spotlight on current complaints aimed at the insolvency industry
What are the recent complaints and reports on the insolvency industry? After a number of busy years for insolvency professionals, they are finding themselves and the industry under the spotlight.

Recent action by the Insolvency Service

What are the recent developments?

Press Release: Insolvency Service winds up eight companies for abusing the insolvency regime

Eight companies that were guilty of serious financial irregularities relating to insolvency proceedings or that offered inaccurate and financially damaging information have been wound up by the High Court in the last six months. The closures are part of an ongoing investigation by the Insolvency Service into unregulated companies offering insolvency advice following reports of abuse.

What had the companies done?

According to the press release by the Insolvency Service, directors of struggling companies were given the impression by the companies that:

  • pre-pack administrations were a closed process designed to benefit them rather than creditors
  • asset values would be kept low
  • avoiding disqualification was a matter of giving the right answers to questions from the Insolvency Service’s investigators

The marketing materials produced by the companies also risked bringing the insolvency regime into disrepute by making generalised, unsubstantiated and disparaging remarks about the insolvency profession.

What action was taken?

The Secretary of State applied to court for winding up orders on grounds of public interest pursuant to his powers under section 124A of the Insolvency Act 1986. The assets of the companies will now be under the control of the liquidator. The conduct of the insolvency practitioners connected with the companies will be assessed by their professional bodies to decide what action should be taken.

Why is this important to the industry?

Pre-pack administrations have long been in the headlines and investigations such as this help to stop some of the companies operating on the wrong side of the line while casting a warning to others. Firms offering creative solutions to businesses will need to be cautious with their approach and marketing materials to avoid finding themselves in the glare. Whether the Insolvency Service stems the flow of operators on the wrong side of the line will depend on the resources the it puts behind the cause and the ease with which new companies can be incorporated to fill the gap left.

The restructuring divisions of banks

What is the background to this?

Banks imposing punitive charges on SMEs

Daily Telegraph, 1 August 2013: Banks have been acc

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