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Summer 2015


Streamlined reporting of director conduct in insolvent companies


From next year we are streamlining director conduct reporting by office holders in insolvent company cases. The current D1 and D2 statutory forms will be replaced by a single on-line form submitted by office holders to the Secretary of State within three months of a company’s insolvency date. Officeholders will no longer have to confirm if a director appears to them to be unfit.

A rules engine will be used to make an initial sift decision of what cases should be considered for possible investigation. The project has undertaken initial user research and is currently developing a working prototype that will be used to conduct more detailed user testing and customer research with insolvency practitioners over the coming months.

As the new reporting system will be entirely online we need to ensure we hold current email addresses for all appointment takers. If you need to update your contact details please email

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Coming soon: moving debt solutions online

From next April applications for bankruptcy will be moving from the courts to an online portal run by the Insolvency Service. Cases will be decided by a newly created office of the adjudicator. Only applications involving an appeal or a post-order application will in future be referred to the court. The new process will provide easier access to bankruptcy and be less stressful for applicants who will no longer have to attend court. The Insolvency Service will also be able to upload information from the online applications directly into our systems, saving time and money.

The new service will enable individuals to assess their eligibility and decide the most suitable debt solution for their circumstances. We are currently developing the portal which will be accessed via GOV.UK and testing it with a small group of debt advisors and individuals seeking a solution for problem debt. The current online application for Debt Relief Orders will also be upgraded as part of the project.

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Focus on: top bracket disqualifications

Enforcement outcomes 2014/15

Some 10% of director disqualifications are for more than 10 years but what sort of conduct leads to the highest tariff bans? This can vary widely according to the facts of each case as the recent cases we outline below demonstrate.

A recurring reason why a director can find themselves on the wrong end of a high tariff ban is involving their company in a VAT fraud.  One director of a mobile phone and computer component wholesaler was disqualified for 13 years for engaging in a scheme linked to VAT fraud and making wrongful VAT reclaims against HM Revenue & Customs, resulting in a claim in the liquidation proceedings by HMRC of over £91 million.

Other forms of scams can also result in long bans, as in the land banking scam operated by a director through three companies in which members of the public were misled into parting with at least £1.7 million for small plots of land of little value. This resulted in his disqualification for 14 years. However it is not only scams that lead to high tariff disqualifications.

Other directors who face long bans include those who fail to promote the interests of their company, such as the ex-director of a football club disqualified for the maximum 15 years for failing to avoid conflict of interest in the running of the club. Flouting a previous disqualification can also result in a high tariff ban, as well as a custodial sentence. Two disqualified directors were sentenced to a combined 13 months in prison, and disqualified for a further 12 years each, for being in control of a company while banned from doing so.

Falsifying information and misappropriating company funds can also be factors in top bracket tariff disqualifications. Two directors of a failed training services provider were disqualified for 12 years after the company was found to have falsified student information to get nearly £200,000 of public funds. The director of two construction companies was banned for 13 years for misappropriating £830,534 of company monies.

Worthy of a final mention was the accountant banned for 11 years for failing to keep proper accounting records or deal with the tax affairs of both his companies.

While the reasons why a director may be disqualified for a long period are many and various, we look at the facts of every case and will pursue those cases that merit it, no matter how complex they might be.

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Change on the horizon for insolvency regulation

The regulatory landscape for the insolvency profession will start to look very different following the decision by three current regulators to relinquish their role. The Solicitors Regulatory Authority, the Law Society of Scotland and the Insolvency Service have all announced plans to move away from insolvency practitioner authorisation in the near future. That will reduce the number of regulators an insolvency practitioner can choose to be authorised by from eight to five recognised professional bodies. The number of IPs is unlikely to reduce significantly, as most of those currently authorised by one of the departing bodies will in all likelihood choose to transfer to another regulator. There are currently around 1,700 authorised insolvency practitioners, of whom around 1,300 actively take appointments.

The remaining regulators will remain subject to oversight by the Insolvency Service, which has the role of ensuring they continue to operate effectively. Our role will be bolstered by the new powers introduced by the Small Business, Enterprise and Employment Act 2015, which for the first time set regulatory objectives for the regulators. The Act also gave the Insolvency Service a proportionate range of sanctions to apply to any recognised professional body found to be in breach of those objectives, bringing us into line with other regulators in the financial services sector. We will shortly be publishing guidance on how we intend to monitor the regulatory objectives and apply sanctions.

Sanctions imposed by regulators against individual insolvency practitioners are now published on the Insolvency Service website. Recent examples include a £15,000 fine and severe reprimand for an insolvency practitioner found to have breached the code of ethics by accepting an appointment where there was a clear conflict due to her firm’s earlier involvement with the insolvent company.

We also continue to publish monitoring reports on the authorising bodies: our most recent report was on the Institute of Chartered Accountants of Scotland’s authorisation of insolvency practitioners.

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European insolvency framework

EU flag

Responses to a call for evidence issued in February on the UK insolvency regime demonstrate that our framework encourages out of court procedures, with minimum court involvement, and focuses on business recovery. The Insolvency Service sought views from industry experts and other interested parties on how the UK regime works to contribute to a review being conducted by the European Commission. The Commission is considering a new approach to business failure and insolvency targeting efficient restructuring of viable enterprises in financial difficulty and a second chance for honest entrepreneurs. Responses received to the call for evidence and the UK submission to the review have been published on our website.

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Updating the insolvency rules

A final draft of the forthcoming Insolvency Rules 2016 has been delivered to the Insolvency Rules Committee. The draft rules update the existing framework as part of a modernisation project and to take forward policy changes under various pieces of primary legislation. You can read the rules and an explanatory note of the policy changes on our website. The Insolvency Rules Committee are now reviewing the changes and will report to the Lord Chancellor who is responsible for making these rules. Subject to this work, it is anticipated that the Rules will be made in Spring 2016, with provisions relating to the new adjudicator's office coming into force on 6 April 2016 and the remainder on 1 October 2016.

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New specialist web content for insolvency practitioners

IP tools webpage

We have created a page on our website providing a single entry point for insolvency practitioners. This page brings together all the tools, forms, guides and other types of information that are relevant for insolvency practitioners. Please email us, using 'Insolvency Practitioner Information' in the subject line, if you have any feedback on this page.

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New hours for Insolvency Enquiry Line

Insolvency Enquiry Line

From 1 September 2015, the opening hours of the Insolvency Enquiry Line will change to 9am - 5pm Monday to Friday. A review of line activity found that comparatively few calls are received between the hours of 8am and 9am, and the new hours will enable us to provide a better service to customers by concentrating resources and reducing waiting time during busier peak hours.

The Insolvency Enquiry Line provides information about insolvency legislation and procedures, including details of the official receivers and redundancy payments offices. The team cannot provide advice on case-related matters but will provide information based on the current insolvency legislation and related procedures and processes.

Until 1 September 2015 hours remain 8am - 5pm, Monday to Friday. You can call the Insolvency Enquiry Line on 0300 678 0015.

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Insolvency Service annual plan

The Insolvency Service has published its annual plan, which sets out our targets and priorities for the year 2015/16. During this year we plan to introduce a number of key changes, including online portals for both bankruptcy petitions and redundancy payments applications to improve our services.

Recently our Chief Executive, Sarah Albon, spoke about plans for the future and her priorities for the agency. You can view a video of the speech as part of our podcast series on our YouTube channel; closed captioning is available.

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Forthcoming statistical releases

19 August: Quarterly enforcement outcomes statistics, April to June 2015

29 October: Quarterly insolvency statistics, July to October 2015

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Contact us

If you have any feedback on this newsletter or other issues please email us.

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