INS48275 - Legal background: Licensing of insolvency practitioners: What is poor conduct by an insolvency practitioner?
An unsatisfactory IP can be defined as one whose professional or
ethical standards and practices fall short of what is expected from
licensed IPs. IPs should perform to a consistent, known, standard.
In dealing with alleged poor conduct by an IP you must
separate any sense of grievance at the tax lost through insolvency
from genuine issues surrounding the way the case has been handled
by the IP.
Below are some examples of what constitutes poor conduct by
an IP. Whilst not exhaustive, they are a good indicator of the
kinds of issues which have a detrimental impact on the Crown and
which might cause the RPBs to act. The list has been categorised
into serious misconduct (where one instance might be sufficient to
report the matter) and minor infringements (which may occur
infrequently as genuine mistakes, but if a pattern emerges become
more serious).
Serious misconduct |
Guidance and practical examples |
| Acting as an IP whilst not licensed | IP either lost licence or does not have one. We would not usually know this, but it may come to our attention, e.g. because we know the IP is bankrupt. |
| Conflict of interest | Might arise if IP or his/her firm previously acted for the company or one of its directors in any way. |
| Misfeasance | This means the IP
breaches his/her duties to creditors. This could be done in many
ways, such as:
|
| Failure to make a timely distribution | IP does not pay a dividend to creditors when there are sufficient funds to do so. |
| Consistent failure to respond to correspondence | Expectation within the Department, based on past experience, that the IP will not respond to correspondence, or will respond late or inadequately. |
| Failure to comply with a Statement of Insolvency Practice (see INS48150) | IP refuses to comply
with a Statement of Insolvency Practice after its contents have
been pointed out
|
| Failure to comply with terms of a voluntary arrangement | IP does not perform
the duties upon him/her stated in the VA proposal
|
| Manipulation of creditors’ meetings | IP disallows valid
votes for the purpose of securing his/her own appointment.
|
Minor infringement |
Guidance and practical examples |
| Failure to respond to correspondence | A failure to respond on time or fully, but where there is no expectation in advance that the IP will fail to respond. |
| Late/non notification of creditors’ meeting |
|
| Late/non submission of reports to creditors | For example within 28 days of a creditors’ voluntary liquidation Section 98 meeting, or on every anniversary of such a liquidation. |
| Creditors’ meetings held at unreasonable time or place | Must commence between 10 am and 4 pm on a business day and take place at a location convenient for the creditors (i.e. not the most convenient location for the IP, the company or its directors) |
| Excessive fees | This may arise due to
high charge out rates, or more time than needed being spend on the
case. The IP should provide detailed information on how the fees
were arrived at if asked (see
INS48180).
|
| Failure to collect in company’s property | IP does not take into
custody and realise the company’s assets
|
If you are in doubt as to whether conduct by an IP should be reported, contact Service Delivery Support (This text has been withheld because of exemptions in the Freedom of Information Act 2000)).
