Trade body R3 has spoken out about corporate insolvency reforms which it says could end up with creditors losing out.
The north-east arm of the insolvency body warned that government proposals to reform business insolvency rules would hit those that are owed money by failed companies.
Allan Kelly, chair of R3, raised concerns about the proposals regarding the returns that creditors receive.
“While we welcome the government’s plans for improving regulatory oversight of fees and for boosting information for creditors, we have serious concerns about the suggestions for amending the way IPs’ (insolvency practitioners) fees are set, in the absence of engaged or secured creditors,” he commented.
“We feel the government’s proposals would have unintended and unwanted consequences, and would lead to the UK’s creditor community losing out were they to be implemented.
The Department for Business, Innovation and Skills has published the results of its six-week consultation into the way insolvency fees are charged. Many of the suggestions have been welcomed by industry professionals as they will enhance regulation and oversight, but others have been criticised.
“More can, and should, be done to improve the way IPs report the value of their work to creditors, but we feel these proposals would hinder them from delivering value to creditors in the first place,” Mr Kelly added.
Under the proposals, limitations would be placed on the ability of practitioners to charge by the hour. Instead, fees would be based on a percentage or as a fixed fee. Mr Kelly believes this method is “not always compatible with the unpredictable nature of insolvency work”.
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