Mr Leonard: I did not provide a written submission beforehand.
The insolvency profession touches many people in different walks of life, whether it is a company director whose company is in trouble; an employee who is about to lose their job; an individual who is in financial distress and facing bankruptcy; a creditor who does not get paid for services rendered; or a member of the public who has paid for something that they will not get. I could go on, but insolvency will have touched an awful lot of members of the public in different ways and to varying degrees of severity.
Simply put, current legislation in Northern Ireland to deal with that widely important area is significantly out of date and badly in need of modernising and refreshing. I was sent a list of 22 proposed changes, and I do not disagree with any of them. In fact, I would actively encourage and welcome implementation of the majority of them. They would make the process of administering estates slicker, quicker and more streamlined. The big-picture outworking is that, the slicker, quicker and more efficient that we can operate, the less money that is spent and the more money that becomes available for the bodies of creditors.
I will not go through each of the 22 changes and comment on all of them, but, having read the transcripts of previous sessions, I will give my commentary on some of the points and themes raised in those sessions, if that is an OK way to approach it.
Mr Leonard: The first topic that I will look at is alignment with England and Wales. I view that as a positive thing from a procedural and practical point of view. If we look back to when insolvency legislation was introduced in the mid-1980s, we see that the pattern was pretty straightforward: England and Wales implemented the legislation, and, a couple of years later, we more or less copied that and put in place. Other than for a period of about two years, our legislation was always more or less identical to that in England and Wales. Significant amendments were made in England and Wales in 2010 and 2015-16. Those changes have not yet been implemented in Northern Ireland. As such, we have a set of regulations and rules that are significantly different from what is in operation in England and Wales. There are a number of insolvency practitioners in Northern Ireland who take on work both in Northern Ireland and in England and Wales. Therefore, we are dealing with two separate sets of checklists and two separate sets of procedures, which I am sure members will have heard about before. Regulators then have to adjust their reviews depending on what jurisdiction they are operating in.
A point to flag up, which has maybe not been raised yet, is that, to become a licensed insolvency practitioner in Northern Ireland, you have to pass the Joint Insolvency Examination Board (JIEB) exam. That has been the case since the mid-90s. The JIEB exam, which all Northern Ireland practitioners sit, is based exclusively on England and Wales legislation; it is not based on Northern Irish legislation. For the past 30 years, a bunch of practitioners in Northern Ireland studied, passed exams and got accredited based on England and Wales legislation, but, now, they are operating under what is essentially a different set of rules. I recently chaired a panel discussion as part of my R3 chairman role. I informally polled the audience to see who is in favour of having unified legislation, and 90% of them were in favour. Among the wider profession, including me, there is a clear appetite for Northern Ireland to be brought into line with England and Wales.
The second area that I will focus on — this has been picked up by others — is how those 22 changes would significantly reduce the administrative burden. I will give you examples to bring to life some of the changes. There is a bit on the removal of the need to obtain sanction. That is only for bankruptcies and compulsory liquidations. If a bankruptcy trustee wanted to take legal action, for example, to repossess a house, he would need to build up a case and get sanction from the official receiver. I have never had that refused before, but it is an administrative step and involves a lot of work. I would welcome that change, because it would allow practitioners to simply exercise their own judgement and get on with such things, which would be a positive step.
The digital communication change, which, I know, has come up before, would be hugely positive. Again, I will give you an example. I looked at a group of three companies whose administrations I run. They have been going since 2018, and, since then, we have spent £40,000 on mailing and posting costs for the reports. That is money that could have been saved and put towards the payment of creditors. Obviously, that also has a carbon footprint impact. I did not attempt to count how many trees were felled to produce £40,000 worth of reports, but it would be a heck of a lot. Therefore, the ability to issue those reports digitally would definitely be welcome.
Another area in which the changes will help is the payment of dividends to creditors. It is not unusual for a dividend to a creditor not to be paid until many years post appointment. If you are a member of the public or a former employee who has a claim and you then move house, I suspect that the insolvency practitioner for the company that owed you money 10 years ago is one of the last people whom you would think to notify. In a case where we issued £200,000 or thereabouts of dividends to former employees, £20,000 in cheques were uncashed, because the creditors had moved house. We did not have to, but we went to the effort of tracking those creditors down, and they all cleared their cheques. Again, people move house or change their personal email address, so that change will be positive, as will the opt-out, given the number of letters and emails that we get saying, "Why am I still getting those blooming reports every six months?". The opt-out will be positive. I know that the Insolvency Practitioners Association (IPA) maybe have reservations about the opt-out, but I certainly would have no issue with it. The dual option whereby, if you do not have a digital way of contacting someone, you send the letter by post, will be positive.
Finally on the administrative burden, a couple of matters that currently require a court application will no longer require a court application, such as payment of dividends from a prescribed part and an initial extension of an administration. Again, those will just streamline and speed up what we do. Overall, the reduced administrative burden will be hugely welcomed by those working in the profession.
I will touch on three other points that were raised. The first is the deemed consent method of appointment. In short, to get appointed as a liquidator in Northern Ireland, you need to convene a creditors' meeting; book a room; invite people to attend, either in person or by proxy; etc. Quite often, a lot of effort goes into organising a meeting that nobody turns up to, and a lot of time is wasted. The deemed consent method would allow us to effectively write to all creditors and say, "Listen, the directors want to appoint us as the liquidator. If you have no objection to this, it will happen". It will still give the creditors who want to have a physical meeting the option to seek to convene one. Equally, it will give a practitioner who may want a meeting for various reasons the option to hold one. The flexibility and optionality that that will bring is welcome.
I have two more points. These were mainly dealt with by Mr Gowdy from the Bar of Northern Ireland, when he was in front of the Committee, but they are very important issues in the profession. The first is the assignment of rights of action to third parties and how the legislation aims to permit that. In my career, I have had a number of instances where there were potential courses of action against either a bankrupt or a former director, but there were simply no funds available in the estate to pursue them. Mr Gowdy made the point — he is right — that creditors have the ability to fund those actions, but they rarely do so, because they are already out of money and do not want to spend more money pursuing an action that may take years to come to fruition. It rarely happens. The consequence is that misdemeanours by directors, rogue bankrupts or anyone else often go unpunished simply because there is no money to chase them. That goes against the public interest on many fronts and short-changes creditors, because funds that could potentially be recovered are not being recovered. It also sends the message, "If you're going to asset-strip a company, strip all the assets so that you don't leave anything behind to allow the liquidator to pursue an action".
The ability to assign a right of action to a third party means that, if there is an action that we cannot afford to pursue, we can sell it to someone who has the means to pursue it. That would be welcome. Mr Gowdy referred to the recent court ruling that expressed concerns about that from a judicial public policy point of view. Again, I will not go into that today, but the principle of introducing the ability to sell those actions is positive. As much as anything else, it will, at least, act as a deterrent if people know that, while the practitioner cannot pursue the case himself because he has no money, he can sell it to someone who can. That would be a positive development. Mr Gowdy observed that there may well be a limited market for purchasers of those claims in Northern Ireland, and I do not disagree with that. I also fear that the quantum, level and size of the claims in Northern Ireland may not be enough to entice buyers, but there is no harm in the practitioner having that in their toolkit, even if it is just used as a threat to bring someone else in to settle something. I saw that happen in a case that I had in England. I did not go ahead with the litigation funding, but the mere threat and ability to do that brought the guy to the table for a settlement.
The Bill, as it stands, does not say that the creditor needs a judgement. However, there is a practical guidance note from the bankruptcy master in Northern Ireland, which says that she wants the creditor to get a judgement first. As we know, the road to getting a judgement is quite a long and expensive one. A creditor may already be out a lot of money, and we are not seeing a huge appetite for going down that road, compared to the appetite for issuing a statutory demand and, then, 21 days later —. That is out of kilter with England and Wales, because the need to have a judgement was brought in as a COVID measure, which has remained here but been removed in England and Wales. I have seen a huge difference between England and Wales and here. Companies here are allowed, in essence, to continue with their head in the sand without the pressure to pay certain debts as they fall due. Therefore, that is a sensible suggestion. How it would interact with the bankruptcy master's guidance is for someone above me, but the principle is welcome.
In summary, guys, the proposed changes are positive. They have been in the pipeline for some time. However, whilst they remain in the pipeline, the inefficiencies that exist in the way that we carry out our work will continue. Although I am speaking for myself, I think that I speak on behalf of everyone when I say that, the sooner that we can get those things through, the better.