The EACTP responds to the APPG on Fair Business Banking’s report:
‘Resolving Insolvency: Restoring confidence in the system’
Today, the All-Party Parliamentary Group (APPG) on Fair Business Banking released its report, ‘Resolving Insolvency: Restoring confidence in the system’. The EACTP is pleased to have contributed to the report and welcomes its findings. Conflicts of interest and collusion have existed in the relationship between Insolvency Practitioners (IPs) and secured creditors for some time. Since the 2010 financial crisis banks have reduced their work out departments which were there to try to save businesses and now when faced with a distressed client, they usually sell the debt, or with a bank-approved IP, force an insolvency. Viable companies that have the potential to be rescued and turned around consensually can be unnecessarily broken up.
The report makes five recommendations to tackle the issues within the insolvency system, all of which we welcome, but to further squash conflicts of interest and promote a culture of rescue the EACTP also seeks to have Certified Turnaround Professionals (CTPs) recognised as suitably qualified people to supervise a moratorium.
Currently, the moratorium laid out in the 2020 CIGA legislation sees a perpetuation of the conflicts of interest between IPs and secured creditors due to the fact that only IPs can be appointed as moratorium supervisors. IPs practice insolvency not turnaround. IPs do not have company side operational experience and the gravitational pull in a moratorium will therefore inevitably be to their insolvency experience and comfort zone.
Turnaround Practitioners, on the other hand, have operational restructuring skills and are trained and experienced in turning companies around. They are better equipped to improve company operating performance and operational cash flows which are fundamental to corporate rescue.
It is the EACTP’s position that Certified Turnaround Professionals (CTPs) should also be recognised as suitably qualified professionals to supervise a moratorium, giving a balance to debtor and creditor interest. This will provide an alternative to an IP as supervisor. It will assist management by bringing operational expertise to the process, saving more value for all stakeholders including employees, secured and unsecured creditors, all in line with the intent of the Act and in the public interest.
For further comment from the EACTP please contact Alan Tilley, President of the EACTP, who contributed to the report, having sat on its panel of industry leaders:
Email: atilley@bmandt.eu
Phone: + 44 (0)7950 808777
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