INSOL Europe Academic Forum and Sussex Law School, Brighton, UK Looking Forward to the Cork Report + 30 Thursday 26 Mar

1. INSOL Europe Academic Forum and Sussex Law School, Brighton, UK Looking Forward to the Cork Report + 30 Thursday 26 March 2009

2. Welcome to the University of Sussex Professor Michael Farthing, Vice-Chancellor

3. Welcome to the Sussex Law School Dr Joanna Bridgeman, Head of School

4. Welcome to University of Sussex, at Brighton

5. Sussex Law School

6. Sussex Law School Programmes UNDERGRADUATE LLB Law LLB Law with Anthropology LLB Law with American Studies LLB Law with Contemporary European Studies LLB Law with French, German, Italian, Spanish LLB Law with International Relations LLB Law with Politics Planned for 2010: LLB Law and Business All Qualifying Law Degrees

7. CPE/GDL Foundational Subjects plus dissertation Currently 30 students

8. Sussex Law School • Knowledge and understanding of legal rules • Critical approach to the law • Studying law in its context • Develop legal skills

9. Postgraduate Programmes • LLM in European Law (from Oct 2009) • LLM in Family and Child Law • LLM in International Criminal Law • LLM in International Law: Rights and Responsibilities • LLM in International Trade Law • LLM in Law and International Security (from October 2009) • LLM Master of Laws

10. RESEARCH RAE 2008 - Ranked 16th out of 67 for legal research All work submitted at least ‘Internationally Recognised’ Identified strengths in Child and Family Law; Criminal Law and Justice; European Law; International and Comparative Law Research themes: Legal conceptualisations (security; solidarity; responsibility; Governance; Citizenship and Constitutions

11. Session 1: The Historical Perspective Chair: Professor David Milman, Lancaster University

12. The Legacy of the 1986 Legislation Professor Philip Wood, University of Oxford

13. Lessons from the 2000 Review Group Professor Harry Rajak, University of Sussex

14. Changing Trends in UK Insolvency Law Dr Donna McKenzie Skene, University of Aberdeen

15. INSOL Europe Academic Forum and Sussex Law School, Brighton, UK Looking Forward to the Cork Report + 30 Thursday 26 March 2009

16. Session 2: The Regulators’ Perspective Chair: Professor Harry Rajak, University of Sussex

17. Administering the Insolvency World: Changes in Institutional Policy Stephen Speed, The Insolvency Service

18. “It is a basic objective of the law to support the maintenance of commercial morality and encourage the fulfilment of financial obligations.” Report of the Insolvency Law Review Committee, part 1 (“Cork Report”)

20. Enforcement Concordat (1998) • Hampton Review (2005) • Regulators' Compliance Code(2008)

21. Regulators should make use of comprehensive risk assessment • Regulators should be accountable for their efficiency and effectiveness, but independent in the decisions they take • No inspection should take place without a reason • Businesses should not have to give unnecessary information, nor give the same piece of information twice • The few businesses that persistently break regulations should be identified quickly and face proportionate and meaningful sanctions • Regulators should provide authoritative, accessible advice easily and cheaply • Regulators should be of the right size and scope, and no new regulator should be created where an existing one can do the work • Regulators should allow economic progress, and only intervene when there is a clear case for protection

23. The Credit Crisis "Restoring both lending and confidence will not be easy and will take time" – Mervyn King, Governor of the Bank of England "The UK began the global recession with a relatively strong jobs position, but our advantage is beginning to disappear as redundancies mount." – Brendan Barber, General Secretary of the Trades Union Congress “I've been hearing a great deal more expressions of concerns about administration in general and pre-pack administrations in particular” – Peter Luff MP, Chair of the House of Commons Business and Enterprise Committee

24. “In particular, an Insolvency Practitioner should consider what a reasonable and informed third party, having knowledge of all relevant information [...] would conclude to be acceptable.” – Evaluation of threats, from the Insolvency Code of Ethics

25. Insolvency Practitioner Fees • More flexibility • Fixed fee option • Reports to creditors every 6 months in administrations; every 12 months in bankruptcies and liquidations

26. Pre-packaged Administrations • Increased transparency(Statement of Insolvency Practice 16) • Active monitoring by The Insolvency Service

27. "Would you tell me, please, which way I ought to go from here?" asked Alice. "That depends a good deal on where you want to get to," said the Cat. – Lewis Carroll

28. Cork’s Insolvency Ombudsman: Time for a Rethink? Professors Adrian Walters & Mary Seneviratne, Nottingham Trent University

29. Cork & IP regulation • Cork’s recommendations: • Establishment of licensing system • Bonding requirements • Establishment of an insolvency ombudsman • Ombudsman recommendation not taken forward

30. IP regulation under Pt XIII IA 1986 • Recognised professional bodies: • Institute of Chartered Accountants in England & Wales (ICAEW) • Association of Chartered Certified Accountants (ACCA) • Insolvency Practitioners Association (IPA) • Institute of Chartered Accountants in Ireland (ICAI) • Institute of Chartered Accountants in Scotland (ICAS) • The Law Society (LS) • The Law Society of Scotland (LSS) • Insolvency Service: • Direct licensing body • ‘Regulator of regulators’ • Self-regulation within a statutory framework

31. Our work for the Insolvency Practices Council (IPC). • The IPC (est. 2000) is a public interest body that advises the insolvency profession on the professional and ethical standards of IPs • First report: Complaints Handling in the Insolvency Practitioner Profession (Jan 2008): http://ssrn.com/abstract=1094757 • Complaints handling within IP and IVA firms • Complaints handling and disciplinary processes of the insolvency regulators • Second report: Complaints Handling by the Regulators of Insolvency Practitioners: A Comparative Study (Jan 2009): http://ssrn.com/abstract=1310791 • Comparison with other professions

32. Context • Ombudsman last considered (and rejected) by the Ten Years On review (1998) • Different world now? • Increase in consumer engagement with the insolvency system • Economic climate • Full regulatory reviews in other professions (Behrens, Carsberg, Clementi etc)

33. Independent/external oversight of IPs outside the self-regulatory framework • Solicitor IPs – Legal Services Ombudsman (Office for Legal Complaints from 2010) • Debt advice/resolution services under a standard consumer credit licence (IPs in IVA firms) – Financial Ombudsman • Contrast position of IPs providing debt advice/resolution services under ICAEW and ACCA group consumer credit licences • Accountant RPBs & IPA: • Internal processes only & strong focus on discipline • Though NB considerable lay involvement: regulatory boards, reviewers of complaints, lay membership of disciplinary & appeal committees

34. Benchmarking complaints& disciplinary systems • Jurisdiction • Purpose • Context • Accessibility • Process • Remedies • Sanctions • Accountability • Independence

35. Benchmarking complaints& disciplinary systems • Jurisdiction • Purpose • Context • Accessibility • Process • Remedies • Sanctions • Accountability • Independence

36. Key trends in comparator professions • Comparators: • Lawyers (Bar Standards Board) • Surveyors (Royal Institution of Chartered Surveyors) • Doctors (General Medical Council, Primary Care Trusts) • Financial services (the Financial Ombudsman scheme) • Separation of regulation & representation • Increased emphasis on consumer redress alongside regulation & discipline • Increased tendency towards external oversight and external avenues of appeal, review and redress for complainants

37. How does the IP profession measure up? • Demonstrable separation between regulation & representation • Complainant facing redress?? • Independent external oversight triggered by complainants?? • Role of Insolvency Service • Court supervision of office holders (?accessibility) • Some shift towards solicitors & surveyors with establishment of separate regulatory boards by ICAEW, ACCA & ICAI • But no comparable external oversight mechanism

38. Conclusions • Strong case for extension of financial ombudsman scheme to all IPs involved in provision of debt advice/debt resolution to individuals • The wider ombudsman question: • Continued currency of arguments against? • Different world • Case for a full Clementi-style review in the interests of maintaining & promoting public confidence?

39. INSOL Europe Academic Forum and Sussex Law School, Brighton, UK Looking Forward to the Cork Report + 30 Thursday 26 March 2009

40. Session 3: The Practitioners’ Perspective Chair: Patricia Godfrey, Nabarro Nathanson

41. Competition over Assets Neil Cooper, ZolfoCooper

42. The Achievements of the 1986 Legislation Nick O’Reilly, President, R3

43. INSOL Europe Academic Forum and Sussex Law School, Brighton, UK Looking Forward to the Cork Report + 30 Thursday 26 March 2009

44. Session 4: The Reform Perspective Chair: Paul Omar, University of Sussex

45. Evolving Trends in Security and the Impact on Insolvency Dr Sandra Frisby Baker & McKenzie Associate Professor and Reader in Company and Commercial Law University of Nottingham Joint Insolvency Conference, 26 March 2009

46. Priority and Control • Security allocates insolvent’s assets to the security holder • Therefore fixed and floating charges, retention of title devices and trust-based schemes deplete the asset pool • On insolvency, initial decision on fate of the company may rest with security holder • Choice of strategy • Administrative receivership (pre-Enterprise Act floating charge), Schedule B1 paragraph 14 Insolvency Act 1986 • Deployment of collateral within insolvency procedure

47. ‘Taxation’ of security holders in insolvency • The vulnerability of the floating charge • Preferential debts, the prescribed part, expenses of the insolvency procedure, post-appointment liabilities • Regulating control rights • The statutory moratorium in administration, disposition of collateral (with court consent in certain cases), taking account of all interests (the ‘purpose’ of administration)

48. Fragmentation of Security Interests in the SME Sector • Asset based lending in the ascendancy • Receivables finance (invoice discounting and factoring), hire purchase, chattel leasing, sale and lease back • Rise of almost 800% in value between 1995 and 2008 (Source – Asset Based Finance Association Statistics) • Industry worth £208,014,000in 2008, representing a rise of 9.1% from 2007 • Sector split evenly between manufacturing and service providers

49. The Effectiveness of Receivables Financing: Tax Avoidance • The Spectrum Plus problem side-stepped • By outright assignment or trust-based collection (the fixed charge characterisation) • And revolving nature of arrangement does not impede cash flow • Although other institutional lenders may devise alternative solutions • Drip feed a current account from a blocked account?

50. The Effectiveness of Receivables Financing: Higher Returns • 100% return in 50% of cases in ‘relationship lending’ sample • Statutory taxation, insolvency-related depreciation • 100% return in 82% of cases in receivables finance lending sample • The main ‘danger’ here being fraud • Advantages to borrowers • Flexible form of finance which can adapt to growth • Asset based lending generally exploits value for companies