Latest Press Releases
| SNP DEMANDS INQUIRY INTO INSOLVENCY INDUSTRY |
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| Wednesday, 28 December 2011 00:00 |
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The SNP have called for an investigation into the insolvency industry amid concerns that administrators are cashing in at the expense of creditors. Moray’s SNP MP Angus Robertson says figures obtained by the SNP show a shocking amount of money tied up in the system and an outrageous number of insolvencies that have not been resolved after over 20 years. Questions tabled by the SNP spokesperson on regulatory reform, Mike Weir MP, revealed a worrying picture of how the insolvency industry is operating. The SNP concerns have been sparked over delays and the level of compensation for the Farepak victims - the Christmas hamper firm collapsed in October 2006 owing £37m to more than 119,000 savers. More than five years later, savers are likely to recover just 5p in the pound, while the final bill for the administrators and their legal advisers has already exceeded £8 million. In Moray alone there have been hundreds affected by the Farepak collapse alone not to mention those affected by the administration of other companies over many years. High Street and high profile examples include: - Zavvi, the music retail chain which went into administration in November 2008, owing unsecured creditors nearly £185m – including 510,000 unredeemed vouchers worth an estimated £4.1m. Creditors are just receiving 15p in the pound, while administrators Ernst & Young collected millions in fees. - Furniture chain, Land of Leather, went into administration with debts of £37m in January 2009. Creditors received just 9p in the pound, while administrators Deloitte and Touche collected fees of £2.5m. The staggering scale of the situation is reinforced by parliamentary questions tabled by the SNP in the House of Commons which reveal that: - For the year 2008/09, the mean level of debt owed by companies in compulsory liquidation was £584,134 and the median was £67,500. For 2009/10 the mean level of debt owed by companies in compulsory liquidation was £1,132,000 and the median was £81,000. - Liquidations have no statutory time limit and some, such as the Israel-British Bank, which entered liquidation in 1974 was only finalised in September 2009. Also in 1974, holiday firm Apal Travel went into liquidation – finalised only in August 2008 by which time some of the holidaymakers entitled to receive the 74p in the pound settlement had probably died in the intervening 35 years. - indeed, more than 19,500 liquidations started five years or more ago have not yet been finalised. - 6,629 liquidations started 20 years or more ago have not yet been finalised. - The level of fees charged by insolvency practitioners is not regulated. Local Moray MP Angus Robertson said: “ Many people in Moray have been directly affected by the high-profile Farepak collapse which still, after over 5 years, remains unresolved and when it does get resolved the amount due to creditors is a tiny percentage while administration costs continue to rise. “ The UK government must take a serious look at the workings of the insolvency industry which appears to be raking in a fortune at the expense of creditors. It looks like another example of rip-off Britain, and another failure by Westminster to regulate properly. “ There is something seriously wrong when liquidations can take a generation to finalise and people are actually dying before the insolvency gravy train comes to a halt. “ I can think of no reason why the Government should allow this scandal to continue. Not only does it fail thousands upon thousands of creditors but it also means uncollected tax debts and money that is stuck in limbo rather than being paid out and helping to get our economy going. “ Just like the banks, current UK insolvency regulation has failed. Part of the problem seems to be that the industry is largely self-regulated. Insolvency work is handled by licensed practitioners, most of whom work for accountancy firms. The practitioners are in turn regulated by accountancy and law professional bodies, which have no independence from the firms they regulate. What’s more, there is no independent complaints investigation procedure or ombudsman to adjudicate on malpractices – there are no questions over fees or delays. “ There will be many, many people in Moray who have lost money through firms going into administration including the many hundreds hit by the Farepak collapse. It is time the lid was lifted on the administration industry and a much fairer, more efficient system implemented." |
