A new website designed to guide creditors through the insolvency process has been launched by insolvency trade body R3.
The site – www.creditorinsolvencyguide.co.uk – explains in simple terms how creditors can engage with the insolvency process to increase their chances of seeing money returned to them, approve insolvency fees, and see action taken against fraudulent or negligent directors or bankrupts.
Built by insolvency experts, the site is also supported by the Chartered Institute of Credit Management and the British Property Federation.
The launch of the website comes as the Small Business, Enterprise, and Employment Bill, which aims to improve creditor engagement in insolvencies, moves towards becoming law at the end of March.
The new website contains a step-by-step guide on how different insolvency processes work, a guide to insolvency terminology, and tips on how to help oversee the running of the insolvency process.
Allan Kelly, chair of R3 in the North East and a restructuring partner with Baker Tilly North East, says: “Creditor engagement is integral to the smooth running of insolvency processes – it is a core part of a strong, fair, and trusted insolvency regime, and the more creditors get involved, the more effective the insolvency process is.
“The insolvency profession, government, and creditor groups have been determined to make it easier for creditors, particularly small businesses, to engage in insolvencies, and this website is an important part of that effort.
“Creditors can provide key information about directors’ and individuals’ behaviour, help locate hidden assets, and they can help oversee the work of insolvency practitioners. The UK has a world class insolvency regime, but it is always open to improvement.
“Thankfully, many businesses will only rarely get involved in an insolvency as a creditor, but this means it can be difficult to get up to speed with the technical ins and outs of insolvency. This can be a stumbling block to engagement. The new website is designed to make it easier for creditors to feel part of the insolvency process.”
Philip King of the Chartered Institute of Credit Management, adds: “Insolvency can be seemingly complex and difficult to understand, but a vital part of the process is in encouraging creditors to engage with insolvency practitioners to help maximise recoveries.
“Understanding how insolvency procedures work, and the terminology used, is key to successful engagement, and the CICM has been pleased to support this initiative by R3. It is a major step forward in demystifying insolvency and provides practical, pragmatic advice that will be welcomed by our members and the wider business community.”
Ian Fletcher, director of policy (real estate), at the British Property Federation, says: “This website is an excellent initiative, and will prove an invaluable source of vital information for unsecured creditors. One of the key issues our members have with the insolvency process is the lack of clarity and understanding particularly among the smaller creditor community. This clear and informative website will be hugely helpful for them and other unsecured creditors and we encourage all our members to support it.”
According to a government-backed review of insolvency fees by Bristol University’s Professor Elaine Kempson, unsecured creditor engagement is a key factor in setting insolvency fees in certain cases.
Although unsecured creditors are the most likely group to attend creditor meetings, the Kempson report found some creditors “lack knowledge and understanding of the insolvency process and their rights.”
According to the Kempson Report, an average of 34 per cent of unsecured creditors contribute to creditor meetings by asking someone to take part or vote on their behalf . 86% of insolvency practitioners say unsecured creditors sometimes or often take part in creditor meetings.
Allan Kelly adds: “Although small businesses do show an appetite to engage in insolvencies, especially when as business owners they may feel the loss personally, it’s important they are helped to participate. Explaining in plain terms how insolvencies work and the role they as creditors can play is an important part of that objective.”