The government’s attitude towards insolvency practitioners

Why a negative attitude towards the insolvency profession doesn’t make sense.


Insolvency practitioners, sometimes working at very short notice and in difficult circumstances, are responsible for ensuring that companies and individuals experiencing severe financial difficulties are given legal and practical advice to ensure that the interests of creditors are protected and that the burden of financial problems that cannot be solved can be brought to a legal end. This enables a new start for the people concerned – it may not be a new start that they would have wanted but the outcome of a formal insolvency procedure is frequently described as a phoenix rising from the ashes for good reason. Even insolvent people and companies are entitled to a future.

The work of the insolvency practitioner and how it is needed by the economy and the government. 

The current insolvency legislation enacted by insolvency practitioners means that there is a workable and legal exit in the economy for situations involving severe financial problems and this exit is both reliable and trusted.

The insolvency practitioners also ensure that assets are sold for their optimum consideration and that available assets are distributed between creditors according to the law. It is very easy to take it for granted that assets will be distributed according to the law but there are alternatives, including directors disposing of assets outside of an insolvency procedure, creditors seizing assets themselves or making threats unless they are paid first. These alternatives are not acceptable for countries such as the UK that have a high standard of insolvency legislation.

 Insolvency practitioners have to pass professional exams and be nominated by another licensed insolvency practitioner before they may qualify as appointment taking insolvency practitioners. The insolvency licence that allows an insolvency practitioner to take appointments has to be renewed annually and insolvency practitioners are regulated for this purpose.

 Qualified and regulated insolvency practitioners together with trusted, reliable insolvency legislation that covers as many eventualities as possible and is sufficiently flexible to change to allow for crises such as the pandemic, are vital for the success of a modern economy.

Who pays for the work done by the insolvency practitioner?

Ask an insolvency practitioner this question and the first reaction is likely to be ‘Well it would be great if I was always paid’. According to the legislation insolvency practitioners are to be paid from the assets in the insolvent estate over which they have been appointed. As a result, if there are no or very few assets in an insolvency estate the insolvency practitioner may not be paid in full or in some cases may not be paid at all, even though the insolvency practitioner’s duties are still to be performed to the same high standard.

But, as insolvency practitioners are to be paid from the assets on the insolvent estate over which they have been appointed, it is the creditors who would otherwise receive this money who effectively pay the office holding insolvency practitioner. It is therefore quite correctly the creditors who approve the payment of the office holding insolvency practitioner’s remuneration.

Work done by the insolvency practitioner that goes beyond realising assets and paying dividends.

 The work carried out by office holding insolvency practitioners is not limited to realising assets and distributing them according to the law. Insolvency practitioners also have to carry out investigations prior to submitting disqualification reports on directors of insolvent companies and quite onerous duties have to be carried out to comply with the anti money laundering legislation. The anti money laundering legislation has been drafted in such a way that there is always the risk that an office holding insolvency practitioner may inadvertently be involved in a money laundering offence and investigations must be carried out to identify and report any such suspicious activities. Submitting a suspicious activity report is the way that the office holding insolvency practitioner can be protected against involvement in a money laundering offence.

In the majority of cases these investigations are unlikely to result in further dividends to creditors. It could be argued that these investigations, certainly those that may result in the identification of a money laundering offence, should be the duty and responsibility of the government. In 2017 the Home Office advised that the financial loss caused by money laundering was likely to exceed £90 billion a year, see, and this has substantial implications for the tax revenue needed by the government in order to function. It is easy to see why legislation has been brought in to involve others, such as insolvency practitioners, in the fight against money laundering.


Insolvency practitioners and their work carried out to comply with insolvency legislation are vital for the success of a modern economy such as that of the UK. Insolvency practitioners carry out important investigation work and anti money laundering duties as well as realising assets and distributing them according to the law and the remuneration of insolvency practitioners is approved by creditors.

Much of the work of insolvency practitioners, especially that to comply with anti money laundering legislation, is principally of benefit to the government and the government trusts insolvency practitioners to do this important work. It is therefore difficult to understand why there are still reports from the government indicating an overall lack of trust in insolvency practitioners.

RMCSC’s independent insolvency compliance reviews include regulatory matters as well as more complex issues of case administration that are vital to achieve a high standard of compliance. RMCSC also carries out internal compliance reviews that are solely for the attention of the insolvency practitioner thus enabling an office holding insolvency practitioner to become aware of shortfalls and make changes to systems before the RPB carries out a monitoring visit. All RMCSC’s reviews may of course be carried out remotely.

Please contact  Caroline Clark on or 07854 967976 for more information about RMCSC’s insolvency compliance reviews and anti money laundering Reg 21 audits or go to RMCSC’s website at