Dear IP 78.

Dear IP 78 was issued a few days ago and gives information about the Insolvency Service website, applications for block transfers of cases and practical advice about the Court of Appeal’s March 2017 decision regarding Green v Wright that is particularly useful from a regulatory point of view.

The facts of Green & Wright have been widely reported, but to summarise, the Court of Appeal ruled that the issue of a certificate of completion in an IVA did not of itself bring to an end the trust over the assets in the arrangement created by the IVA. Issuing a certificate of completion will not bring the trust over the assets to an end unless this is also one of the provisions of the proposals. The assets concerned in Green v Wright were PPI claims.

The Insolvency Service makes it very clear that insolvency practitioners who are supervisors of individual voluntary arrangements and who have been holding funds pending the Green v Wright decision should by now have taken steps to review these cases and make payments to the debtor or distributions to creditors, as appropriate. To quote Dear IP 78, ‘it is no longer appropriate for this case (Green v Wright) to be cited as a reason for completion certificates to be withheld or distributions to creditors further delayed’. There is an expectation that insolvency practitioners will already have reviewed their IVAs to investigate the likelihood of PPI claims.

Dear IP 78 usefully reiterates that there is no new regulatory expectation as a result of the  Green v Wright decision that an insolvency practitioner should routinely investigate, review and/or otherwise seek to re-visit closed cases.

Supervisors are reminded about the potential conflict of interest that may arise as a result of a PPI claim and the negotiation of a settlement regarding this with the debtor. Insolvency practitioners are reminded to act with objectivity and that self interest is defined in the Ethics Code as a threat to the principle of objectivity. It would be completely inappropriate to pursue a PPI claim if the only beneficiary was the supervisor, for example, and the self interest threat in a situation such as that is all too clear.

Dear IP 78 again makes it very clear that supervisors should clearly document their decisions regarding completion certificate IVAs, in particular those where payment has been received from the debtor in ‘full and final settlement’ of the amounts outstanding and there is a PPI claim. Supervisors must be able to demonstrate to regulators that they have struck a fair balance between the interests of the creditors and the debtor.

Mention of file notes and other documents so that insolvency practitioners can demonstrate the work that they have undertaken now inevitably involves consideration of checklists. Checklists can indeed be very valuable tools, although their inappropriate use has been criticised by the ICAEW and IPA. A ticked off checklist does not either document work actually undertaken or reliably demonstrate the matters taken into account when reaching decisions about any aspect of insolvency administration. Relying on checklists to effectively replace the work itself is very high risk and the fact that the Insolvency Service finds it necessary to remind insolvency practitioners of the need for documentation to demonstrate their work means that good file notes are as important as ever.

Dear 78  also gives information about the updated guidance on the Insolvency Service website about how it is possible to make a complaint against a company, director or debtor. If the company or debtor is subject to an insolvency procedure then the guidance encourages the complainant to contact the office holder.

Dear IP 78 gives a reminder that the Insolvency Rules 2016 have made procedural changes to the process of making applications for the block transfer of insolvency cases. R12.37 requires the insolvency practitioner making the application for the block transfer to give notice of it to the Secretary of State on or before the date the application is made. There was previously a requirement to give notice to the Secretary of State at least five business days before the hearing. Notice of the application should be made to the Secretary of State via IPRegulation.section@insolvency.gsi.gov.uk and the draft order, schedules and any accompanying witness statements should be attached to the notice. Breaches of this rule will be referred to the RPB of the insolvency practitioner concerned.

It seems that the Insolvency Service has effectively introduced a ‘deemed consent’ procedure of its own in as much as a letter will no longer be sent to the applicant for the block transfer advising that that there is no objection to the transfer. Applicants will only be contacted if there is a regulatory matter which should be brought to the attention of the Court.

Please do not hesitate to contact me on 07854 967976 or caroline.clark@rmcsc.co.uk  if you have any queries about this or would like to learn more about the insolvency compliance consultancy service provided by RMCSC. This includes peer reviews and insolvency compliance reviews as well as assisting with the management of complaints and reassessing standard documents.