Small Business, Enterprise and Employment Bill (HL Bill 57)

(2) In discharging functions under this Part, the Secretary of State must
have regard to the regulatory objectives.

391C Meaning of “regulatory functions” and “regulatory objectives”

(1) This section has effect for the purposes of this Part.

(2) 5“Regulatory functions”, in relation to a recognised professional body,
means any functions the body has—

(a) under or in relation to its arrangements for or in connection
with—

(i) authorising persons to act as insolvency practitioners, or

(ii) 10regulating persons acting as insolvency practitioners, or

(b) in connection with the making or alteration of those
arrangements.

(3) “Regulatory objectives” means the objectives of—

(a) having a system of regulating persons acting as insolvency
15practitioners that—

(i) secures fair treatment for persons affected by their acts
and omissions,

(ii) reflects the regulatory principles, and

(iii) ensures consistent outcomes,

(b) 20encouraging an independent and competitive insolvency-
practitioner profession whose members—

(i) provide high quality services at a cost to the recipient
which is fair and reasonable,

(ii) act transparently and with integrity, and

(iii) 25consider the interests of all creditors in any particular
case,

(c) promoting the maximisation of the value of returns to creditors
and promptness in making those returns, and

(d) protecting and promoting the public interest.

(4) 30In subsection (3)(a), “regulatory principles” means—

(a) the principles that regulatory activities should be transparent,
accountable, proportionate, consistent and targeted only at
cases in which action is needed, and

(b) any other principle appearing to the body concerned (in the case
35of the duty under section 391B(1)), or to the Secretary of State (in
the case of the duty under section 391B(2)), to lead to best
regulatory practice.”

(2) In section 419 of the Insolvency Act 1986 (regulations for the purposes of Part
13), at the end insert—

“(5) 40In making regulations under this section, the Secretary of State must
have regard to the regulatory objectives (as defined by section
391C(3)).”

136 Oversight of recognised professional bodies

After section 391C of the Insolvency Act 1986 (inserted by section 135) insert—

“Oversight of recognised professional bodies

391D Directions

(1) This section applies if the Secretary of State is satisfied that an act or
5omission of a recognised professional body (or a series of such acts or
omissions) in discharging one or more of its regulatory functions has
had, or is likely to have, an adverse impact on the achievement of one
or more of the regulatory objectives.

(2) The Secretary of State may, if in all the circumstances of the case
10satisfied that it is appropriate to do so, direct the body to take such steps
as the Secretary of State considers will counter the adverse impact,
mitigate its effect or prevent its occurrence or recurrence.

(3) A direction under this section may require a recognised professional
body—

(a) 15to take only such steps as it has power to take under its
regulatory arrangements;

(b) to take steps with a view to the modification of any part of its
regulatory arrangements.

(4) A direction under this section may require a recognised professional
20body—

(a) to take steps with a view to the institution of, or otherwise in
respect of, specific regulatory proceedings;

(b) to take steps in respect of all, or a specified class of, such
proceedings.

(5) 25For the purposes of this section, a direction to take steps includes a
direction which requires a recognised professional body to refrain from
taking a particular course of action.

(6) In this section “regulatory arrangements”, in relation to a recognised
professional body, means the arrangements that the body has for or in
30connection with—

(a) authorising persons to act as insolvency practitioners, or

(b) regulating persons acting as insolvency practitioners.

391E Directions: procedure

(1) Before giving a recognised professional body a direction under section
35391D, the Secretary of State must give the body a notice accompanied
by a draft of the proposed direction.

(2) The notice under subsection (1) must—

(a) state that the Secretary of State proposes to give the body a
direction in the form of the accompanying draft,

(b) 40specify why the Secretary of State has reached the conclusions
mentioned in section 391D(1) and (2), and

(c) specify a period within which the body may make written
representations with respect to the proposal.

(3) The period specified under subsection (2)(c)—

(a) must begin with the date on which the notice is given to the
body, and

(b) must not be less than 28 days.

(4) On the expiry of that period, the Secretary of State must decide whether
5to give the body the proposed direction.

(5) The Secretary of State must give notice of that decision to the body.

(6) Where the Secretary of State decides to give the proposed direction, the
notice under subsection (5) must—

(a) contain the direction,

(b) 10state the time at which the direction is to take effect, and

(c) specify the Secretary of State’s reasons for the decision to give
the direction.

(7) Where the Secretary of State decides to give the proposed direction, the
Secretary of State must publish the notice under subsection (5); but this
15subsection does not apply to a direction to take any step with a view to
the institution of, or otherwise in respect of, regulatory proceedings
against an individual.

(8) The Secretary of State may revoke a direction under section 391D; and,
where doing so, the Secretary of State—

(a) 20must give the body to which the direction was given notice of
the revocation, and

(b) must publish the notice and, if the notice under subsection (5)
was published under subsection (7), must do so (if possible) in
the same manner as that in which that notice was published.

391F 25Financial penalty

(1) This section applies if the Secretary of State is satisfied—

(a) that a recognised professional body has failed to comply with a
requirement to which this section applies, and

(b) that, in all the circumstances of the case, it is appropriate to
30impose a financial penalty on the body.

(2) This section applies to a requirement imposed on the recognised
professional body—

(a) by a direction given under section 391D, or

(b) by a provision of this Act or of subordinate legislation under
35this Act.

(3) The Secretary of State may impose a financial penalty, in respect of the
failure, of such amount as the Secretary of State considers appropriate.

(4) In deciding what amount is appropriate, the Secretary of State—

(a) must have regard to the nature of the requirement which has
40not been complied with, and

(b) must not take into account the Secretary of State’s costs in
discharging functions under this Part.

(5) A financial penalty under this section is payable to the Secretary of
State; and sums received by the Secretary of State in respect of a
45financial penalty under this section (including by way of interest) are to
be paid into the Consolidated Fund.

(6) In sections 391G to 391I, “penalty” means a financial penalty under this
section.

391G Financial penalty: procedure

(1) Before imposing a penalty on a recognised professional body, the
5Secretary of State must give notice to the body—

(a) stating that the Secretary of State proposes to impose a penalty
and the amount of the proposed penalty,

(b) specifying the requirement in question,

(c) stating why the Secretary of State is satisfied as mentioned in
10section 391F(1), and

(d) specifying a period within which the body may make written
representations with respect to the proposal.

(2) The period specified under subsection (1)(d)—

(a) must begin with the date on which the notice is given to the
15body, and

(b) must not be less than 28 days.

(3) On the expiry of that period, the Secretary of State must decide—

(a) whether to impose a penalty, and

(b) whether the penalty should be the amount stated in the notice
20or a reduced amount.

(4) The Secretary of State must give notice of the decision to the body.

(5) Where the Secretary of State decides to impose a penalty, the notice
under subsection (4) must—

(a) state that the Secretary of State has imposed a penalty on the
25body and its amount,

(b) specify the requirement in question and state—

(i) why it appears to the Secretary of State that the
requirement has not been complied with, or

(ii) where, by that time, the requirement has been complied
30with, why it appeared to the Secretary of State when
giving the notice under subsection (1) that the
requirement had not been complied with, and

(c) specify a time by which the penalty is required to be paid.

(6) The time specified under subsection (5)(c) must be at least three months
35after the date on which the notice under subsection (4) is given to the
body.

(7) Where the Secretary of State decides to impose a penalty, the Secretary
of State must publish the notice under subsection (4).

(8) The Secretary of State may rescind or reduce a penalty imposed on a
40recognised professional body; and, where doing so, the Secretary of
State—

(a) must give the body notice that the penalty has been rescinded
or reduced to the amount stated in the notice, and

(b) must publish the notice; and it must (if possible) be published
45in the same manner as that in which the notice under subsection
(4) was published.

391H Appeal against financial penalty

(1) A recognised professional body on which a penalty is imposed may
appeal to the court on one or more of the appeal grounds.

(2) The appeal grounds are—

(a) 5that the imposition of the penalty was not within the Secretary
of State’s power under section 391F;

(b) that the requirement in respect of which the penalty was
imposed had been complied with before the notice under
section 391G(1) was given;

(c) 10that the requirements of section 391G have not been complied
with in relation to the imposition of the penalty and the interests
of the body have been substantially prejudiced as a result;

(d) that the amount of the penalty is unreasonable;

(e) that it was unreasonable of the Secretary of State to require the
15penalty imposed to be paid by the time specified in the notice
under section 391G(5)(c).

(3) An appeal under this section must be made within the period of three
months beginning with the day on which the notice under section
391G(4) in respect of the penalty is given to the body.

(4) 20On an appeal under this section the court may—

(a) quash the penalty,

(b) substitute a penalty of such lesser amount as the court considers
appropriate, or

(c) in the case of the appeal ground in subsection (2)(e), substitute
25for the time imposed by the Secretary of State a different time.

(5) Where the court substitutes a penalty of a lesser amount, it may require
the payment of interest on the substituted penalty from such time, and
at such rate, as it considers just and equitable.

(6) Where the court substitutes a later time for the time specified in the
30notice under section 391G(5)(c), it may require the payment of interest
on the penalty from the substituted time at such rate as it considers just
and equitable.

(7) Where the court dismisses the appeal, it may require the payment of
interest on the penalty from the time specified in the notice under
35section 391G(5)(c) at such rate as it considers just and equitable.

(8) In this section, “the court” means the High Court or, in Scotland, the
Court of Session.

391I Recovery of financial penalties

(1) If the whole or part of a penalty is not paid by the time by which it is
40required to be paid, the unpaid balance from time to time carries
interest at the rate for the time being specified in section 17 of the
Judgments Act 1838 (but this is subject to any requirement imposed by
the court under section 391H(5), (6) or (7)).

(2) If an appeal is made under section 391H in relation to a penalty, the
45penalty is not required to be paid until the appeal has been determined
or withdrawn.

(3) Subsection (4) applies where the whole or part of a penalty has not been
paid by the time it is required to be paid and—

(a) no appeal relating to the penalty has been made under section
391H during the period within which an appeal may be made
5under that section, or

(b) an appeal has been made under that section and determined or
withdrawn.

(4) The Secretary of State may recover from the recognised professional
body in question, as a debt due to the Secretary of State, any of the
10penalty and any interest which has not been paid.

391J Reprimand

(1) This section applies if the Secretary of State is satisfied that an act or
omission of a recognised professional body (or a series of such acts or
omissions) in discharging one or more of its regulatory functions has
15had, or is likely to have, an adverse impact on the achievement of one
or more of the regulatory objectives.

(2) The Secretary of State may, if in all the circumstances of the case
satisfied that it is appropriate to do so, publish a statement
reprimanding the body for the act or omission (or series of acts or
20omissions).

391K Reprimand: procedure

(1) If the Secretary of State proposes to publish a statement under section
391J in respect of a recognised professional body, it must give the body
a notice—

(a) 25stating that the Secretary of State proposes to publish such a
statement and setting out the terms of the proposed statement,

(b) specifying the acts or omissions to which the proposed
statement relates, and

(c) specifying a period within which the body may make written
30representations with respect to the proposal.

(2) The period specified under subsection (1)(c)—

(a) must begin with the date on which the notice is given to the
body, and

(b) must not be less than 28 days.

(3) 35On the expiry of that period, the Secretary of State must decide whether
to publish the statement.

(4) The Secretary of State may vary the proposed statement; but before
doing so, the Secretary of State must give the body notice—

(a) setting out the proposed variation and the reasons for it, and

(b) 40specifying a period within which the body may make written
representations with respect to the proposed variation.

(5) The period specified under subsection (4)(b)—

(a) must begin with the date on which the notice is given to the
body, and

(b) 45must not be less than 28 days.

(6) On the expiry of that period, the Secretary of State must decide whether
to publish the statement as varied.”

137 Recognised professional bodies: revocation of recognition

(1) After section 391K of the Insolvency Act 1986 (inserted by section 136) insert—

“Revocation etc of recognition

391L 5 Revocation of recognition at instigation of Secretary of State

(1) An order under section 391(1) or (2) in relation to a recognised
professional body may be revoked by the Secretary of State by order if
the Secretary of State is satisfied that—

(a) an act or omission of the body (or a series of such acts or
10omissions) in discharging one or more of its regulatory
functions has had, or is likely to have, an adverse impact on the
achievement of one or more of the regulatory objectives, and

(b) it is appropriate in all the circumstances of the case to revoke the
body’s recognition under section 391.

(2) 15If the condition set out in subsection (3) is met, an order under section
391(1) in relation to a recognised professional body may be revoked by
the Secretary of State by an order which also declares the body
concerned to be a recognised professional body which is capable of
providing its insolvency specialist members with partial authorisation
20only of the kind specified in the order (see section 390A(1)).

(3) The condition is that the Secretary of State is satisfied—

(a) as mentioned in subsection (1)(a), and

(b) that it is appropriate in all the circumstances of the case for the
body to be declared to be a recognised professional body which
25is capable of providing its insolvency specialist members with
partial authorisation only of the kind specified in the order.

(4) In this Part—

(a) an order under subsection (1) is referred to as a “revocation
order”;

(b) 30an order under subsection (2) is referred to as a “partial
revocation order”.

(5) A revocation order or partial revocation order—

(a) has effect from such date as is specified in the order, and

(b) may make provision for members of the body in question to
35continue to be treated as fully or partially authorised (as the
case may be) to act as insolvency practitioners for a specified
period after the order takes effect.

(6) A partial revocation order has effect as if it were an order made under
section 391(2).

391M 40 Orders under section 391L: procedure

(1) Before making a revocation order or partial revocation order in relation
to a recognised professional body, the Secretary of State must give
notice to the body—

(a) stating that the Secretary of State proposes to make the order
and the terms of the proposed order,

(b) specifying the Secretary of State’s reasons for proposing to
make the order, and

(c) 5specifying a period within which the body, members of the
body or other persons likely to be affected by the proposal may
make written representations with respect to it.

(2) Where the Secretary of State gives a notice under subsection (1), the
Secretary of State must publish the notice on the same day.

(3) 10The period specified under subsection (1)(c)—

(a) must begin with the date on which the notice is given to the
body, and

(b) must not be less than 28 days.

(4) On the expiry of that period, the Secretary of State must decide whether
15to make the revocation order or (as the case may be) partial revocation
order in relation to the body.

(5) The Secretary of State must give notice of the decision to the body.

(6) Where the Secretary of State decides to make the order, the notice under
subsection (5) must specify—

(a) 20when the order is to take effect, and

(b) the Secretary of State’s reasons for making the order.

(7) A notice under subsection (5) must be published; and it must (if
possible) be published in the same manner as that in which the notice
under subsection (1) was published.

391N 25 Revocation of recognition at request of body

(1) An order under section 391(1) or (2) in relation to a recognised
professional body may be revoked by the Secretary of State by order
if—

(a) the body has requested that an order be made under this
30subsection, and

(b) the Secretary of State is satisfied that it is appropriate in all the
circumstances of the case to revoke the body’s recognition
under section 391.

(2) An order under section 391(1) in relation to a recognised professional
35body may be revoked by the Secretary of State by an order which also
declares the body concerned to be a recognised professional body
which is capable of providing its insolvency specialist members with
partial authorisation only of the kind specified in the order (see section
390A(1)) if—

(a) 40the body has requested that an order be made under this
subsection, and

(b) the Secretary of State is satisfied that it is appropriate in all the
circumstances of the case for the body to be declared to be a
recognised professional body which is capable of providing its
45insolvency specialist members with partial authorisation only
of the kind specified in the order.

(3) Where the Secretary of State decides to make an order under this
section the Secretary of State must publish a notice specifying—

(a) when the order is to take effect, and

(b) the Secretary of State’s reasons for making the order.

(4) 5An order under this section—

(a) has effect from such date as is specified in the order, and

(b) may make provision for members of the body in question to
continue to be treated as fully or partially authorised (as the
case may be) to act as insolvency practitioners for a specified
10period after the order takes effect.

(5) An order under subsection (2) has effect as if it were an order made
under section 391(2).”

(2) In section 415A of the Insolvency Act 1986 (fees orders: general), after
subsection (4) insert—

“(5) 15Section 391M applies for the purposes of an order under subsection
(1)(b) as it applies for the purposes of a revocation order made under
section 391L.”

138 Court sanction of insolvency practitioners in public interest cases

After section 391N of the Insolvency Act 1986 (inserted by section 137) insert—

“Court sanction of insolvency practitioners in public interest cases

391O 20 Direct sanctions orders

(1) For the purposes of this Part a “direct sanctions order” is an order made
by the court against a person who is acting as an insolvency practitioner
which—

(a) declares that the person is no longer authorised (whether fully
25or partially) to act as an insolvency practitioner;

(b) declares that the person is no longer fully authorised to act as an
insolvency practitioner but remains partially authorised to act
as such either in relation to companies or individuals, as
specified in the order;

(c) 30declares that the person’s authorisation to act as an insolvency
practitioner is suspended for the period specified in the order or
until such time as the requirements so specified are complied
with;

(d) requires the person to comply with such other requirements as
35may be specified in the order while acting as an insolvency
practitioner;

(e) requires the person to make such contribution as may be
specified in the order to one or more creditors of a company,
individual or insolvent partnership in relation to which the
40person is acting or has acted as an insolvency practitioner.

(2) Where the court makes a direct sanctions order, the relevant recognised
professional body must take all necessary steps to give effect to the
order.

(3) A direct sanctions order must not be made against a person whose
authorisation to act as an insolvency practitioner was granted by the
Department of Enterprise, Trade and Investment in Northern Ireland
(see section 390A(2)(b)).

(4) 5A direct sanctions order must not specify a contribution as mentioned
in subsection (1)(e) which is more than the remuneration that the
person has received or will receive in respect of acting as an insolvency
practitioner in the case.

(5) In this section and section 391P—

• 10“the court” means the High Court or, in Scotland, the Court of
  Session;

• “relevant recognised professional body”, in relation to a person
  who is acting as an insolvency practitioner, means the
  recognised professional body by virtue of which the person is
  15authorised so to act.

391P Application for, and power to make, direct sanctions order

(1) The Secretary of State may apply to the court for a direct sanctions
order to be made against a person if it appears to the Secretary of State
that it would be in the public interest for the order to be made.

(2) 20The Secretary of State must send a copy of the application to the
relevant recognised professional body.

(3) The court may make a direct sanctions order against a person where, on
an application under this section, the court is satisfied that condition 1
and at least one of conditions 2, 3, 4 and 5 are met in relation to the
25person.

(4) The conditions are set out in section 391Q.

(5) In deciding whether to make a direct sanctions order against a person
the court must have regard to the extent to which—

(a) the relevant recognised professional body has taken action
30against the person in respect of the failure mentioned in
condition 1, and

(b) that action is sufficient to address the failure.

391Q Direct sanctions order: conditions

(1) Condition 1 is that the person, in acting as an insolvency practitioner or
35in connection with any appointment as such, has failed to comply
with—

(a) a requirement imposed by the rules of the relevant recognised
professional body;

(b) any standards, or code of ethics, for the insolvency-practitioner
40profession adopted from time to time by the relevant
recognised professional body.

(2) Condition 2 is that the person—

(a) is not a fit and proper person to act as an insolvency
practitioner;