The insolvency profession faces almost constant regulatory and statutory change. Present times appear no different, with the return of HMRC to preferential status, potential for a single regulator, forthcoming Pre-Pack Regulations and a new Code of Ethics. Coupled with a global pandemic, Brexit and the ensuing increased demand for professional services and heightened media attention, the insolvency profession is working in eventful times.
Against this backdrop, the University of Glasgow and Insolvency Support Services conducted part one of a two-part survey among a representative sample of the insolvency profession.
Read the full research report, with all the findings and our commentary.
Summary of Key Research Results
- The top two triggers for a predicted rise in corporate insolvencies are the phasing out of the furlough scheme and the continuation of COVID-19 restrictions, with 94% and 86% of respondents respectively selecting these factors as likely or very likely.
- Around four in five respondents believe a repayment demand for deferred VAT is likely or very likely to act as a trigger for a rise in corporate insolvencies.
- The two sectors most badly affected by the pandemic so far are hospitality & leisure and retail, with 90% and 64% of respondents respectively identifying these sectors. Overall, 24 different sectors are mentioned by respondents, highlighting the wide-reaching consequences of lockdown and COVID-19 restrictions in the UK.
- Only 1% of respondents believe HMRC is fully prepared for the increased level of engagement with the insolvency profession expected from being a preferential creditor.
- 64% of respondents believe that prospects for rescue within formal insolvency will decrease because of HMRC’s return to preferential status, and that it will lead to a reduction in lending facilities and increased use of personal guarantees and fixed charges.
- Just under half of respondents (49%) support a single regulator, 34% do not and 16% either don’t know or have no opinion.
- Of those in favour of a single regulator, 50% of respondents prefer a new entity to be established.
- We find support for the Regulations to provide a definition of a pre-pack (71%) and a definition of who can act as evaluator (94% agree or strongly agree).
- Opinion on the proposed timescale of eight weeks for a substantial disposal to a connected party is divided between those who consider it too long (39%) and those who consider it the right amount of time (33%).
- Of those who feel the eight-week period is too long, all respondents selected an option of four weeks or less.
- The most popular choice for an evaluator is an IP. There is also strong support for the Pre-Pack Pool or someone with relevant experience.
- 89% of respondents agree or strongly agree that an evaluator should be a member of a professional body.
- A significant majority believe it is likely or very likely that sales to connected parties will be effected by a liquidator rather than by an administrator (88%), or directors will sell the business or assets to a connected party pre-insolvency (75%).
- 72% of respondents have undertaken some training related to the revised Insolvency Code of Ethics. With the current spotlight on the insolvency profession, CPD in this area seems critical.
- Only 34% of respondents believe the revised Code will improve standards within the profession.
Our report on the findings of our second research survey on COVID-19’s Impact on the UK Insolvency and Restructuring Profession is also available to download.