Creditor engagement and the Holy Grail: New website explains insolvency processes clearly and simply
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Creditor engagement and the Holy Grail: New website explains insolvency processes clearly and simply
The insolvency trade body R3 has launched a new website which appears to be a really useful source of information for creditors who have ever wanted or needed to navigate a trading partner’s insolvency process, but have never quite been able to grasp how to do so effectively. The website, as a tool to promote creditor engagement, has the backing of creditor bodies (the Chartered Institute of Credit Management and the British Property Federation) as well as both government and opposition, and can be found here.
Although the website is expressed to be aimed at sole traders and smaller companies, who are perhaps less likely to be frequent creditors in an insolvency, in my experience even finance directors of larger companies can find the terminology and processes used in insolvent situations confusing. The website contains helpful glossaries of commonly used terms and even a step by step checklist of what to do and when under each procedure. I would therefore heartily recommend the website to anyone looking for a good first port of call to help them understand how they might best manage a particular exposure to an insolvent debtor.
The new website is very timely given that insolvency practitioner fees, reporting requirements and arrangements for creditors’ meetings are currently undergoing something of a regulatory overhaul, having been heavily debated in consultations and parliamentary committees. A number of new reforms in this area will come into force in October 2015, including an obligation upon IPs to give creditors up-front estimates of costs which they will not be able to exceed without going back to creditors for approval. These reforms, like the website, are designed to promote and facilitate creditor engagement in the insolvency process, in response to criticism from some quarters that the insolvency profession does not currently do enough in this area.
My own view is that the search for genuine creditor engagement has rather a lot of common features with the Arthurian quest for the Holy Grail; we know it is a very good and powerful thing, but we have struggled to know where to look for it. The government has certainly been looking hard, turning over all sorts of rocks in the process. In its own quest to find it, R3 (in the role of Sir Galahad for these purposes, perhaps) has had to traverse the swamps of creditor apathy and peer through the fogs of ignorance and confusion. Let us hope that, like Sir Galahad, we actually recognise what we are looking for when we find it. Personally, I suspect that mandatory up-front estimates of fees for the entire insolvency process at the outset are more likely to be a false grail, but I come from the perspective of having witnessed how mandatory cost budgeting in litigation has served only to drive up costs. Still, we will never find the true grail without a lot of faith! In the meantime, the new website appears to be a genuine guiding light in the right general direction.
These observations, and to an extent those made on the new website, are of necessity very general in nature. If you are looking for more specific guidance to help you navigate your own or your business’ exposure in a particular insolvency please do get in touch with me, or with another member of our Corporate Restructuring & Insolvency team. We will hopefully be able to help you cut to the chase, but at the least we will be able to introduce you to a suitable insolvency practitioner accountant who offers bespoke creditor services.