Insolvency News, Issue 1 June 2020
In this issue, find out more about new resources, NOCLAR and the new Corporate Insolvency and Governance Act.
In this issue
The 2020 Insolvency Monitoring Report contains all the latest advice for ICAEW insolvency practitioners; whether you are preparing for your next insolvency monitoring review, or need ensure you are complying with SIP 11. Prepared by ICAEW's quality assurance reviewers, this year's report covers the key issues identified from insolvency reviews carried out in the last 12 months as well as advice on how to avoid the same issues. You will also find advice on how to comply with SIP 11 and a comprehensive guide to all the support and resources available to ICAEW IPs.
The fundamental principles and the framework approach in the revised Insolvency Code of Ethics (effective 1 May 2020) are as before, but the new Code looks and feels different with its use of requirements and application material.
In line with government guidance we are not currently carrying out onsite monitoring reviews. If you or your firm is due a monitoring review in 2020 we may contact you to discuss the possibility of carrying out a desk-based monitoring review. Depending on the type of review this can include telephone meetings or video conferences with one of our reviewers. The reviewer will ask you to provide key documentation in a secure manner as part of the review. For audit and insolvency monitoring reviews, we will need access to your (paper/electronic) files and we’ll discuss how to do this with you before the review. If you need to postpone your review because your business has been affected by COVID-19, please email QADvisits@icaew.com. Some IPs and firms have asked if their monitoring review can be brought forward. If you would like us to bring forward your firm’s monitoring review, please let us know by emailing QADvisits@icaew.com and we will do our best to arrange this for you.
The Corporate Insolvency and Governance Act 2020 received Royal Assent on Friday (26 June). Both the permanent and temporary measures could be a valuable lifeline as the downturn continues.
Most notable is a new standalone moratorium option for companies in financial difficulty. The new rules give businesses a minimum of 20 days of protection from certain creditor actions, with an insolvency practitioner acting in the role of monitor.
Paul Bannister, Head of Policy at the Insolvency Service will introduce the Act and explain some of the Policy intentions behind the measures that are being introduced.
Representatives from all the insolvency regulators will also be putting questions to Paul to seek clarity on the issues facing the profession today.
The Joint Insolvency Committee (JIC) is consulting on changes to four Statements of Insolvency Practice (SIP).
The relevant SIPs are:
3.1 - individual voluntary arrangements
3.2 - company voluntary arrangements
7 - Presentation of financial information in insolvency proceedings and
9 - Payments to insolvency office holders and their associates
The JIC recognises that these are testing times. But these are only proposed changes. There is no intention to amend the SIPs without careful consideration of the responses received and any plan to introduce changes will take in to account any continuing challenges faced by the insolvency profession.
The Government's recent legislative changes do not impact the SIPs which are the subject of this consultation.
Updates from around ICAEW
ICAEW’s PII Committee is aware that there has been a hardening of the PII market over the last 18 months with some insurers withdrawing from the accountants’ PII market completely. These developments could mean that firms find it more challenging (and/or time-consuming) to renew cover than previously. It could also mean that firms find their premiums increase significantly. For this reason, it is recommended that firms prepare early for their renewal and that they provide complete and accurate information to insurers at the outset to ensure a smooth renewal or transfer of cover to another insurer.
Generally, insurers are reviewing more critically the risks they are willing to accept and the price they will set for cover. This may particularly affect firms with a claims/notifications history and/or those involved in ongoing legal action and/or firms engaged in activity which insurers perceive as more high risk (eg, tax mitigation schemes, investment advice, insolvency, M&A, and audit work).
Therefore, the PII Committee recommends that firms prepare early for their renewal and that they take advice from a trusted and reputable broker or other advisor when taking out their insurance. The Committee recommends firms discuss their placement strategy with their broker to ensure access to a number of different insurers; specifically, firms may wish to clarify whether their brokers are ‘whole of market’ brokers.
ICAEW is seeking to strengthen the independence of its regulatory function. As part of this process, a new Regulatory Board Nomination Committee is being established, reporting formally to the ICAEW Regulatory Board.
The successful candidate will:
- be a lay person, ie, not an accountant or legal professional;
- be a skilful and experienced chair, preferably at a senior level;
- have experience in the recruitment and appraisal of board members and others;
- have knowledge or experience of regulation and the public interest.