How to keep going and keep to the law. Part 1

Life has changed dramatically and very quickly in the last fortnight or so and based on the most recent government announcements these changes are likely to continue. The changes to our personal lives are difficult to accept and understand although it is vital that covid-19 is taken seriously and that we all act to protect ourselves and each other.

The changes to our professional lives are equally difficult to accept and work through, but in a different way. The work of insolvency practitioners is governed by legislation, much of which demands precise action in specific ways and within carefully defined deadlines. The increasing lock down that is demanded, correctly, by the government makes it difficult if not impossible to carry out all this precise action as required and within the specified deadlines.

When faced with a conundrum that seems impossible to resolve consider the following principles:-

  • Insolvency practitioners, once appointed, work for the benefit of creditors. When faced with choices that are difficult to resolve consider the impact of each option on creditors.
  • Insolvency practitioners have the ability not to interpret legislation literally; as a profession we can think outside the box. Insolvency practitioners and solicitors instructed by them have always found ways of interpreting legislation to make the most of a difficult situation. Follow the principles of the legislation, the Ethics Code and SIPs.
  • If it is not possible to resolve a problem then don’t make the situation worse. In a pre appointment situation where the directors make these decisions make sure that you give precise advice how not to make things worse and keep a record of this.
  • Prioritise your work. You may no longer have the resources to do everything so decide what is most important and what can wait. Ensure that estate bank accounts are secure and are reconciled. Ensure that assets are secure. The ICAEW and IPA have indicated that they will be flexible when considering documents and returns that are filed or sent late but there is no suggestion that it is OK not to file or send documents and returns.
  • Consider the impact of covid-19 on your own business. It is very possible that insolvency practitioners will have more work in the next weeks and months but remuneration must still be approved by creditors. As creditors themselves cease to trade it could become even more difficult to find creditors to approve remuneration. Engaging with creditors will become even more important in order to protect insolvency practitioners’ own cashflow. Cash is king for everyone.
  • Now more than ever insolvency practitioners will have to use their professional and business knowledge and experience to deal with future challenges. Checklists can be excellent tools but no checklist has been written to deal with the effect of covid-19.
  • It will be more important than ever for insolvency practitioners to be able to demonstrate the options they have considered, the decisions they have taken and the reasons for these decisions. It is likely that in the future many insolvency practitioners will have to make decisions that would ordinarily be challenged by the ICAEW or IPA. Insolvency practitioners who can show the reasons for their decisions will be in a much stronger position than those who give the impression that they did not know or care what happened. Always make contemporaneous file notes.
  • Compliance reviews should continue although not in the same way as before. RMCSC clients can send scanned documents for review or send files to be reviewed in RMCSC’s office.  RMCSC is setting up focussed reviews for matters that are now high risk because of changes brought about by covid-19. Compliance – doing a good job – remains as important as ever and when life returns to normal RMCSC’s compliance reviews with reports including suggestions for the future are going to be more necessary than before.
  • Don’t forget to carry out customer due diligence and other anti money laundering work. This will be as important as it ever was. Confusion and uncertainty caused by covid-19 could create fantastic opportunities for people involved in money laundering. Insolvency practitioners should continue to ensure that they are not inadvertently involved in money laundering offences.

Please continue to contact me on caroline.clark@rmcsc.co.uk or 07854 967976 if you have any insolvency or anti money laundering technical or compliance queries. RMCSC is based in my home so RMCSC still working and will be doing so throughout this crisis. RMCSC can also help you prepare a strategy to deal with insolvency compliance when covid-19 is over.

But most importantly, please take great care!