1. The OFT’s Market Study into Corporate Insolvency: An Overview. Sue Aspinall

2. Research objectives ● Scope: the market for Corporate Insolvency Practitioners 2 Bank panels Secured and unsecured creditors Market incentives on IPs Complaints, monitoring, discipline Effectiveness, agility, focus Effectiveness of regulation Recovery, net of IP fees Knock-on effects, such as credit Harm, if any Market based remedy Regulatory change Possible remedy

3. Findings based on six main strands of research 3 36+ face to face meetings, 66+ detailed written submissions, 4 open meetings with IPs Stakeholder input 500 random administrations starting in 2006, traced through to CVL or dissolution Companies house data 1232 responses, a high 10% response rate Statistical analysis to understand differences Online survey of creditors 33 in-depth interviews by Marketing Science Detailed coverage of views In-depth creditor interviews Part of the R3 quarterly survey 312 responses – 1/3 of appointment taking IPs Survey of Insolvency Practitioners Publicly available reports, academic articles, legislation, regulation, and guidance Desk research

4. Unsecured creditors possess little ability to influence insolvency process despite the formal procedures They also lack the expertise and incentive to do so Confirmed by CH data, surveys and stakeholder evidence Shown via econometric analysis of 500 insolvencies gathered from Companies House dataset Confirmed by IPs via the sharing of early findings and some limited stakeholder evidence Multiple RPBs and duplicative role of IS hinders effective and consistent censure of poor performance Confirmed by a survey of IPs by trade association and stakeholder evidence Extensive prescriptive regulation lacks clear focus Regulatory system (with multiple overlapping bodies) poorly reflects way in which market operates Confirmed by stakeholder evidence, surveys and desk-based research In effect, secured creditors chose the IP IPs need to maintain good relationship with banks Results in good oversight of IP’s actions Confirmed by CH data and stakeholder evidence Where secured creditors not paid in full, market works well Where secured creditor paid in full, IP fees and actions relatively unconstrained In the 37% of administrations where secured creditor paid in full, IP fees 9% greater Regulation fails to correct problems, or deal with poor performing Insolvency Practitioners Regulatory system too complex FindingReason & Evidence Findings Summary

5. Approximately 9% in administration Same market dynamics seen in CVL Decreased pressure on fees Complaints about duration in CVL Concerns over pre-packs Decreased oversight on actions Decreased recovery leads, at the margin, to decreased extension of credit Decreased trust in IP profession Knock on effects What is the resulting harm? 5

6. Restoration of trust, increased consistency of sanctioning and firmer treatment of rogue IPs Increased ability to challenge fees by avoiding the prohibitively expensive court route Regulation better aligned with the interests of all creditors, protection of more vulnerable creditors and encouraging competition IS better able to ensure RPBs meet regulatory objectives via use of proportionate sanctioning powers and vetos New regulatory changes proposed and voted on only by those possessing a direct interest in making the right decision and in proportion to their membership In order to ensure that creditors other than the banks possess more ability to control and influence the insolvency process Remedies Summary Remedy 6 An independent complaints body, paid for by the profession. Complaints body to have the power to review fees, and return overcharged fees to creditors Providing objectives for the regulatory regime against which its performance can be measured Reform of the regulatory system by establishing the IS as a dedicated regulator of the seven RPBs Streamlining decision making in the regulatory regime Reforming some of the rules themselves Effect

7. What we think the market will look like 7 RPBs focussed on meeting clear regulatory objectives, and decision making system allows them to do so Insolvency Service indentifies best practice, and punishes RPBs that hinder delivery of regulatory objectives IPs act in the interests of the company and creditors, influenced by market forces where possible, and fear of regulatory sanction where necessary Creditors, customers, directors, and shareholders trust IPs and their regulators. Where trust or regulation breaks down, independent complaints body ensures consistency and restores trust Economic growth and efficiency

8. Next steps ● OFT report considered by BIS and other Government departments. ● We believe they will benefit the wider economy, increase trust and demand for insolvency practitioners, and impose no extra burden on the taxpayer. ● The OFT will keep a small team in place to take part in the discussion. 8