Legislation such as the Bribery Act 2010 is correctly greeted by the insolvency profession with concern to make sure that it is properly understood and to ensure that compliance with it can be achieved. There is also frequently an element of despair that the writers of the legislation had not troubled to take the same care to understand the insolvency profession, but compliance is part of our professional lives so we work with it.
If legislation is relatively new so there is no case law to refer to or there is limited guidance as to how it applies to insolvency practitioners it can be tempting to reduce compliance with it to the completion of a checklist or questionnaire. The member of the team responsible for the completion of the checklist may not always be qualified or particularly senior but compliance by means of the completion of a checklist does not obviously add value to the business so it is not given priority. A senior member of the team will sign off the checklist and it seems that this should give it credibility.
There are perhaps two main reasons why an insolvency practitioner aims for compliance with legislation – achieving regulatory approval and reducing the risk of successful legal action against the insolvency practitioner. Both reasons are equally important.
Regulatory approval is effectively confirmed each year when an office holder’s insolvency licence is renewed and it is reconsidered at least once every three years by means of a monitoring visit from the office holder’s RPB.
Reducing the risk of successful criminal prosecution or legal action against the insolvency practitioner is difficult to assess or even take seriously when dealing with new legislation that seems to have no relevance to the day to day work of an insolvency practitioner. A breach of the Bribery Act 2010 may however result in those involved being prosecuted for a criminal offence. Someone found guilty might be subject to a prison sentence or a fine, or both.
Recent case law has made the effect of the Bribery Act 2010 very relevant for insolvency practitioners. In April 2018 directors of two different companies were found guilty of breaches of the Bribery Act 2010 and were imprisoned for 12 and 20 months. They were also disqualified from acting as directors for six and seven years and one of the directors was fined £10,697. One director had given £10,000 and had promised a further £29,000 to the other in return for confidential information that enabled contracts worth £6 million to be won by one of the director’s companies.
Information about the case can be found on the Crown Prosecution Service’s website at https://www.cps.gov.uk/cps/news/company-directors-jailed-bribery
The amount of the bribes in this case seem very small to result in prison sentences – this is no Euribor prosecution – but this case law will be followed in future Bribery Act 2010 prosecutions and severe penalties may result from what could seem to be relatively minor breaches of compliance.
The company concerned was also prosecuted for a breach of S7 of the Bribery Act 2010 and was found guilty, (R v Skansen Interiors Ltd). S7 states that it is a defence to a charge for a breach of the Bribery Act 2010 for the commercial organisation concerned to show that it had ‘adequate procedures’ in place to prevent the unlawful activity. The company in this case was small, working from one office, employing about 30 people and working on a national rather than an international level.
It is understood that the company did not have a specific anti bribery policy or written controls that were actively used by all members of staff. It is understood that it was claimed that the relatively few employees were aware that bribery was wrong and there was said to be a culture of honesty and integrity within the company. These were not accepted by the jury as being ‘adequate procedures’ to prevent a breach of the Bribery Act 2010.
These decisions have been widely criticised but they show that the Bribery Act 2010 does very much apply to all commercial organisations including small companies. Past guidance from the Ministry of Justice about the Bribery Act 2010 has advised that ‘the more serious the offence the more likely it is that a prosecution will be required in the public interest’ and it seems from these decisions that the public interest is more easily triggered than initially thought. Or it may be that Bribery Act 2010 prosecutions will not be limited to being in the public interest.
When insolvency practitioners are considering procedures and systems to achieve compliance with legislation such as the Bribery Act 2010, satisfying the regulators may be possible with a bought in checklist. A successful defence against criminal prosecution may well demand more proactive systems and procedures.
RMCSC provides a high quality compliance consultancy service to insolvency practitioners. I have more than 30 years insolvency experience and my relevant qualifications, including passing the JIEB exams and having an MBA, mean that I think outside the box and give proactive advice to RMCSC’s insolvency practitioner clients. Please contact me on 07854 967976 or firstname.lastname@example.org if you would like to book an insolvency compliance review or to learn more about RMCSC and the insolvency compliance consultancy services we provide.