Welcome for review into fees charged by insolvency practices

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A SENIOR figure from Yorkshire’s business community is calling for a fairer deal for creditors after the Government announced a review of fees charged by insolvency practitioners.

Gordon Millward, the regional chairman of the Federation of Small Businesses (FSB), in South and East Yorkshire, said prices charged by receivers and insolvency practitioners should be more realistic.

He welcomed any Government moves to make the insolvency regime fairer for small businesses, adding: “People are put out of business because of debts linked to liquidations.”

A spokesman for the Institute of Directors (IOD) in Yorkshire and the Humber, also welcomed the Government review, because of concerns raised by some IOD members regarding the practices of some insolvency professionals.

The spokesman added: “In the dying days of any business, the insolvency practitioner should ensure that they search for the fairest outcome for all parties involved.

“Sadly, many go in with the view that they will extract their payment first. While it should be an imperative that they do get paid their fees, practice and terms of engagement must be transparent and fair at all times. We are encouraged at the announcement of a review.”

However, Robert Adamson, the Yorkshire chairman of R3, the insolvency trade body, said he was confident work being done by insolvency practitioners already represented good value for money, otherwise fees would not be agreed by creditors.

Business Minister Jo Swinson has announced a review that will aim to ensure creditors achieve value for money from procedures carried out by insolvency practitioners.

The review, which will be led by Professor Elaine Kempson from the University of Bristol, will hear views from members of the insolvency profession as well as debtors and creditors. A report is expected in summer 2013.

The review will build on an earlier study, conducted by the Office of Fair Trading, which responded to concerns expressed by creditors that fees charged by insolvency practitioners do not represent value for money.

A Government spokesman said: “Insolvency practitioners are entitled to be paid for the work they do, but it is vital to ensure that creditors are being charged fairly to increase confidence in the insolvency regime.”

Ms Swinson said: “The issue of insolvency practitioner fees remains a key concern for creditors and debtors, and I’m pleased to announce the appointment of Professor Kempson to look at this issue. Insolvency is a difficult process for all concerned, but especially so for those unfamiliar with how the system works. Creditors want to see a system that returns as much money to them as quickly as possible.”

Ms Swinson also announced a reform to the way complaints against insolvency practitioners are handled by industry regulators.

The Government’s reform package includes a new ‘complaints gateway’ operated by the Insolvency Service. There will also be common sanctions guidance to “provide transparency and consistency to the sanctions system”, which the regulators will refer to when deciding upon a sanction.

The reforms are expected to be in place in the Spring.

Ms Swinson said: “A user friendly, consistent and fair complaints system will help improve confidence in the process.”

Yorkshire has a large number of insolvency professionals. Many of them have been extremely active at a time when many firms are struggling.

Mr Adamson said: “We already have a system in place that returns as much money to creditors as possible – that is the insolvency practitioner’s statutory duty.

“Improving accessibility and consistency to the complaints system is something our members are keen to support, especially given the large number of regulators for our profession.

“We’re also keen to promote understanding amongst the creditor community about the role they can play in the insolvency process and the options available to them.

“The establishment of a single complaints gateway will still not remedy perceived unsecured creditor frustration at insolvency practitioners or the insolvency process, because this frustration is inextricably tied to the statutory order of priority.

“However, we do look forward to working with the minister to promote a greater understanding of how the insolvency process works, without damaging what is a world leading insolvency regime.”