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Member guidance on non-Insolvency Act work

1. IPA members who may or may not be authorised as Insolvency Practitioners (IPs), will occasionally undertake work that, while suited to their skills, does not require an insolvency authorisation under S388 of the Insolvency Act 1986 (As Amended) (IA86) to perform.

2. Examples of this include acting as a trustee for a trust not captured by insolvency law or acting as a fixed-charge or Law of Property Act 1925 (LPA) receiver. 

3. In relation to Individual Voluntary Arrangements (IVAs), where IVAs have failed or expired following the decision in Strongmaster v Kaye ChD ([2002] EWHC 1408 (Ch), [2002] BPIR 1259)1, then, subject to the terms of the IVA, there may be a surviving trust with the creditors of the IVAs as beneficiaries. 

4. The decision in Green vs Wright ([2017] EWCA Civ 111) provided confirmation that where an IVA has created a trust over assets which is not terminated upon completion of the arrangement and the former supervisor receives the realisation of a trust asset after the completion of an IVA, it is in order for them to distribute these funds in accordance with the terms of the arrangement.  This is notwithstanding that a Completion Certificate may have been issued to the debtor.  The decision confirms that the mere issuing of the Completion Certificate will not itself, without express additional provision, terminate any trust over the arrangement assets. 

5. The IPA is aware of some members who are acting as trustee of significant numbers of such trusts, following the closure of IVAs where they, or fellow practitioners at their firms, had been the supervisor.

6. The IPA is concerned that, without adequate supervision, such trusts may not be properly concluded or concluded in a timely manner, to the detriment of the creditor beneficiaries.

7. The IPA considers that, since these trusts have arisen from regulated IVA appointments and are, in effect, an extension of those appointments, they should be administered by the former IVA supervisor or, if that is impracticable, another authorised IP who is experienced with IVA appointments.

8. To this end the IPA considers former supervisors should maintain their insolvency authorisation while administering such trusts but, if they do not intend to act as an IP with reference to S388 IA86, then it is acceptable to change the authorisation to a ‘non-appointment taking’ status, ensuring that all necessary insurances are maintained.

9. Further and in the absence of any other information, the IPA is concerned that the presence of such trusts in significant numbers may be indicative of a failure to have planned properly for the closure of the IVAs and/or a failure to progress the trusts to conclusion in a timely manner. 

10. Such failures could cause reputational damage for the profession and could give rise to a potential liability to disciplinary action for the individual(s) concerned.  The IPA is, therefore, obliged to understand the work being undertaken in relation to these trusts. 

11. The IPA considers that ‘a significant number’ for this purpose is greater than or equal to 50 cases.

12. Where the IPA becomes aware of a volume of IVA closures with surviving trusts, it will incorporate a review of the position into its monitoring activity.  The IPA considers that all papers relating to the trusts and how they are administered are examinable because they may inform whether the IVAs were properly concluded.

13. The IPA acknowledges that it cannot assert that to act as a trustee other than under IA86 requires an insolvency authorisation.  However, given the obligation outlined above for the IPA to understand the position, if such trusts were not able to be monitored similarly to insolvency appointments by way of normal authorisation monitoring, then the only alternative would be to treat the knowledge of a volume of such trusts as a potential complaint investigation by default and make enquiries via that route on an ongoing basis, escalating to the Regulation and Conduct Committee as necessary.  The latter treatment would apply to any non-authorised IPA member undertaking this work.

14. In summary, where a Licensed Insolvency Practitioner (LIP) or former LIP is acting as trustee of a continuing trust arising from an IVA or other related but unregulated work and is not engaged in other work which requires insolvency authorisation, they should nonetheless maintain an insolvency licence of at least non-appointment taking status and be subject to monitoring as for appointment taking LIPs in relation to such work in order to maintain public confidence.

1An IVA which has expired by effluxion of time has come to an end and cannot be revived.