The government is calling on the Insolvency Service (IS) to speed up the introduction of its new delivery strategy and says the service should look to alternative funding models to ensure that it can maintain appropriate enforcement and investigation activity.
The comments are contained in the government's response to a special report from the Business, Innovation and Skills select committee reviewing the work of the IS.
The response notes that the IS 'has now been considering a new delivery strategy since early 2010, which has created uncertainty for staff and added to the delay in delivering much needed improvements' and says the government wants to receive 'a clear timetable' for implementation.
The government is also concerned that that resource constraints, both in terms of funding and staffing, have had an impact on the investigatory and enforcement regime.
In its response, the government says: 'We believe that any dilution of enforcement activity would send entirely the wrong message to delinquent directors and recommend that the department provides the IS with sufficient, and if necessary, additional funding to disqualify or sanction all directors who have been found guilty of misconduct.'
It wants the service to work with the Department for Business, Innovation and Skills (BIS) to look at alternative funding models to the current fee-generated income model. Amongst the options the government says the IS should consider are increasing the fees for individual debtor bankrupts, possibly on a sliding scale, and looking at ways to stagger payment rather than requiring the fee to be paid up front automatically.>
The government's response highlights continuing concerns over pre-pack administrations and it wants BIS and the IS to commission more research in this area. It also says the IS should monitor the use of Statement of Insolvency Practice Note 16 (SIP 16) and consider stronger penalties and larger fines for non-compliance, as well as publishing guidance on the use of these sanctions.
While industry body R3 welcomed the report, it said the government had not gone far enough in addressing low director disqualification rates. It also challenged the government's views on the SIP 16 reporting process, saying the IS should provide feedback to all insolvency practitioners who commit 'minor or technical breaches', as this could significantly boost compliance rates.
Liz Bingham, R3 president said: 'For serious breaches, it is encouraging that the Insolvency Service are conducting targeted investigations on those practitioners who consistently fall below the required standard, thereby removing "bad apples" from the system - a goal we all share.'
