A new regulatory regime is essential to secure the best outcome for unsecured creditors who lose out during an insolvency process, according to ICM chief executive Phillip King.
But King admitted that in many cases, creditors have themselves to blame for failing to fully engage with the insolvency process:.
He added: “If creditors don’t play their part in the insolvency, then they can’t really complain about the outcome or the work of the insolvency practitioner.”
Referring to the Insolvency Service consultation on regulatory reform, the ICM supports the proposal for an independent complaints body to review fees and remuneration.
He said: “Our members who, for the most part, are unsecured creditors want a speedy, consistent, and fair response to complaints and are averse to any additional complication or levels of bureaucracy.”
King believes the ICM could be of value to any new body, and the institute is keen to offer expertise to support the process.
He added: “The independent complaints body should comprise a majority of lay members (but with sufficient IP expertise input) and have a chair of sufficient gravitas. Its activity could be overseen by the Insolvency Service.”
This, he says, raises the question of unnecessary costs being incurred through frivolous or vexatious complaints.
“In such cases, there should be a mechanism for the costs to be borne by the complainant which might also stifle the emergence of a ‘no win – no fee’ industry,” he added.
To protect against vexatious complaints, King said that one safeguard might be a requirement that any complaint has to be supported by the creditors committee. He explained that this might also serve to encourage engagement by unsecured creditors at earlier stages in the insolvency process.
King said the Insolvency Service as oversight regulator should monitor standards to ensure they are achieving the desired outcome, adding: “More than this. It should hold the recognised professional bodies (RPB) accountable if/when it believes that they or their standards are failing.”