Ministers have launched an investigation into the insolvency sector, following complaints from collapsed firms about their objectivity standards.
The all-party parliamentary group (APPG) on fair business banking has said that it received complaints from owners of collapsed businesses who did not think insolvency firms did enough to protect their company, according to a report in The Times.
The investigation is likely to focus on the relationship between insolvency practitioners and the banks that have the power to appoint them.
When businesses collapse, their biggest creditors are usually banks, which hire an insolvency firm to recover assets. This has led to accusations that the insolvency firms act in the interests of the banks over other creditors or the business.
The APPG has submitted calls for evidence from the dominant firms in the industry, including the Insolvency Service, big accountancy firms and regulatory bodies.
There is no independent regulator or ombudsman to oversee the industry, however there is the Insolvency Service, a government agency that can administer bankruptcies and debt relief orders and looks into the affairs of companies in liquidation.
The Insolvency Service also advises ministers government departments and agencies on insolvency and redundancy related issues and investigates and prosecutes breaches of firms and insolvency legislation on behalf of the department for business, energy and industrial strategy.
Data from the Insolvency Service has showed that the number of individual voluntary arrangements, an alternative to bankruptcy, rose by three per cent to 7,057 as of November 2020 compared with the same period in 2019.
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