Small Business, Enterprise and Employment Bill (HL Bill 91)

(b) in the entry for section 104A(2), in column 2, omit “at year’s end”.

Regulation of insolvency practitioners: amendments to existing regime

137 Recognised professional bodies: recognition

(1) In Part 13 of the Insolvency Act 1986 (insolvency practitioners), for section 391
5(recognised professional bodies) (as substituted by section 17 of the
Deregulation Act 2015) substitute—

“391 Recognised professional bodies

(1) The Secretary of State may by order, if satisfied that a body meets the
requirements of subsection (4), declare the body to be a recognised
10professional body which is capable of providing its insolvency
specialist members with full authorisation or partial authorisation.

(2) The Secretary of State may by order, if satisfied that a body meets the
requirements of subsection (4), declare the body to be a recognised
professional body which is capable of providing its insolvency
15specialist members with partial authorisation only of the kind specified
in the order (as to which, see section 390A(1)).

(3) Section 391A makes provision about the making by a body of an
application to the Secretary of State for an order under this section.

(4) The requirements are that—

(a) 20the body regulates (or is going to regulate) the practice of a
profession,

(b) the body has rules which it is going to maintain and enforce for
securing that its insolvency specialist members—

(i) are fit and proper persons to act as insolvency
25practitioners, and

(ii) meet acceptable requirements as to education and
practical training and experience, and

(c) the body’s rules and practices for or in connection with
authorising persons to act as insolvency practitioners, and its
30rules and practices for or in connection with regulating persons
acting as such, are designed to ensure that the regulatory
objectives are met (as to which, see section 391C).

(5) An order of the Secretary of State under this section has effect from such
date as is specified in the order.

(6) 35An order under this section may be revoked by an order under section
391L or 391N (and see section 415A(1)(b)).

(7) In this Part—

(a) references to members of a recognised professional body are to
persons who, whether members of that body or not, are subject
40to its rules in the practice of the profession in question;

(b) references to insolvency specialist members of a professional
body are to members who are permitted by or under the rules
of the body to act as insolvency practitioners.

(8) A reference in this Part to a recognised professional body is to a body
recognised under this section (and see sections 391L(6) and 391N(5)).

391A Application for recognition as recognised professional body

(1) An application for an order under section 391(1) or (2) must—

(a) 5be made to the Secretary of State in such form and manner as the
Secretary of State may require,

(b) be accompanied by such information as the Secretary of State
may require, and

(c) be supplemented by such additional information as the
10Secretary of State may require at any time between receiving the
application and determining it.

(2) The requirements which may be imposed under subsection (1) may
differ as between different applications.

(3) The Secretary of State may require information provided under this
15section to be in such form, and verified in such manner, as the Secretary
of State may specify.

(4) An application for an order under section 391(1) or (2) must be
accompanied by—

(a) a copy of the applicant’s rules,

(b) 20a copy of the applicant’s policies and practices, and

(c) a copy of any guidance issued by the applicant in writing.

(5) The reference in subsection (4)(c) to guidance issued by the applicant is
a reference to guidance or recommendations which are—

(a) issued or made by it which will apply to its insolvency specialist
25members or to persons seeking to become such members,

(b) relevant for the purposes of this Part, and

(c) intended to have continuing effect,

including guidance or recommendations relating to the admission or
expulsion of members.

(6) 30The Secretary of State may refuse an application for an order under
section 391(1) or (2) if the Secretary of State considers that recognition
of the body concerned is unnecessary having regard to the existence of
one or more other bodies which have been or are likely to be recognised
under section 391.

(7) 35Subsection (8) applies where the Secretary of State refuses an
application for an order under section 391(1) or (2); and it applies
regardless of whether the application is refused on the ground
mentioned in subsection (6), because the Secretary of State is not
satisfied as mentioned in section 391(1) or (2) or because a fee has not
40been paid (see section 415A(1)(b)).

(8) The Secretary of State must give the applicant a written notice of the
Secretary of State’s decision; and the notice must set out the reasons for
refusing the application.”

(2) An order under section 391(1) or (2) of the Insolvency Act 1986 made before the
45coming into force of this section is, following the coming into force of this
section, to be treated as if it were made under section 391(1) or (as the case may
be) (2) as substituted by subsection (1) of this section.

138 Regulatory objectives

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

“Regulatory objectives

391B Application of regulatory objectives

(1) In discharging regulatory functions, a recognised professional body
5must, so far as is reasonably practicable, act in a way—

(a) which is compatible with the regulatory objectives, and

(b) which the body considers most appropriate for the purpose of
meeting those objectives.

(2) In discharging functions under this Part, the Secretary of State must
10have 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) “Regulatory functions”, in relation to a recognised professional body,
means any functions the body has—

(a) 15under or in relation to its arrangements for or in connection
with—

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

(ii) regulating persons acting as insolvency practitioners, or

(b) in connection with the making or alteration of those
20arrangements.

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

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

(i) secures fair treatment for persons affected by their acts
25and omissions,

(ii) reflects the regulatory principles, and

(iii) ensures consistent outcomes,

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

(i) 30provide high quality services at a cost to the recipient
which is fair and reasonable,

(ii) act transparently and with integrity, and

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

(c) 35promoting the maximisation of the value of returns to creditors
and promptness in making those returns, and

(d) protecting and promoting the public interest.

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

(a) the principles that regulatory activities should be transparent,
40accountable, 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
of 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) 5In making regulations under this section, the Secretary of State must
have regard to the regulatory objectives (as defined by section
391C(3)).”

139 Oversight of recognised professional bodies

(1) After section 391C of the Insolvency Act 1986 (inserted by section 138) insert—

“Oversight of recognised professional bodies

391D 10Directions

(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
had, or is likely to have, an adverse impact on the achievement of one
15or 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, 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) 20A direction under this section may require a recognised professional
body—

(a) to 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
25regulatory arrangements.

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

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

(b) 30to take steps in respect of all, or a specified class of, such
proceedings.

(5) For 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) 35In this section “regulatory arrangements”, in relation to a recognised
professional body, means the arrangements that the body has for or in
connection with—

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

(b) regulating persons acting as insolvency practitioners.

391E 40Directions: procedure

(1) Before giving a recognised professional body a direction under section
391D, 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) specify why the Secretary of State has reached the conclusions
5mentioned 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
10body, and

(b) must not be less than 28 days.

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

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

(6) 15Where the Secretary of State decides to give the proposed direction, the
notice under subsection (5) must—

(a) contain the direction,

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

(c) specify the Secretary of State’s reasons for the decision to give
20the 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
subsection does not apply to a direction to take any step with a view to
the institution of, or otherwise in respect of, regulatory proceedings
25against an individual.

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

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

(b) 30must 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 Financial penalty

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

(a) 35that 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
impose a financial penalty on the body.

(2) This section applies to a requirement imposed on the recognised
40professional body—

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

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

(3) The Secretary of State may impose a financial penalty, in respect of the
45failure, 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
not been complied with, and

(b) must not take into account the Secretary of State’s costs in
5discharging 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
financial penalty under this section (including by way of interest) are to
be paid into the Consolidated Fund.

(6) 10In 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
Secretary of State must give notice to the body—

(a) 15stating 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
section 391F(1), and

(d) 20specifying 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
body, and

(b) 25must 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
or a reduced amount.

(4) 30The 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
body and its amount,

(b) 35specify 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
with, why it appeared to the Secretary of State when
40giving 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
after the date on which the notice under subsection (4) is given to the
45body.

(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
recognised professional body; and, where doing so, the Secretary of
5State—

(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
in the same manner as that in which the notice under subsection
10(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) 15that 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) 20that 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
25penalty 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) 30On 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
35for 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
40notice 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
45section 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
required 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
5Judgments 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
penalty is not required to be paid until the appeal has been determined
or withdrawn.

(3) 10Subsection (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
under that section, or

(b) 15an 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
penalty and any interest which has not been paid.

391J 20Reprimand

(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
had, or is likely to have, an adverse impact on the achievement of one
25or 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
omissions).

391K 30Reprimand: 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) stating that the Secretary of State proposes to publish such a
35statement 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
representations with respect to the proposal.

(2) 40The 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) On the expiry of that period, the Secretary of State must decide whether
45to 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) specifying a period within which the body may make written
5representations 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) must not be less than 28 days.

(6) 10On the expiry of that period, the Secretary of State must decide whether
to publish the statement as varied.”

(2) In section 415A of the Insolvency Act 1986 (fees orders: general), after
subsection (1A) (inserted by section 17 of the Deregulation Act 2015) insert—

“(1B) In setting under subsection (1) the amount of a fee in connection with
15maintenance of recognition, the matters to which the Secretary of State
may have regard include, in particular, the costs of the Secretary of
State in connection with any functions under sections 391D, 391E, 391J,
391K and 391N.”

140 Recognised professional bodies: revocation of recognition

(1) 20After section 391K of the Insolvency Act 1986 (inserted by section 139) insert—

“Revocation etc of recognition

391L 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) 25an act or omission of the 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, and

(b) it is appropriate in all the circumstances of the case to revoke the
30body’s recognition under section 391.

(2) If 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
35providing its insolvency specialist members with partial authorisation
only 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
40body to be declared 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.

(4) In this Part—

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

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

(5) 5A 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
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.

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

391M Orders under section 391L: procedure

(1) Before making a revocation order or partial revocation order in relation
15to 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
20make the order, and

(c) specifying 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
25Secretary of State must publish the notice on the same day.

(3) 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.

(4) 30On the expiry of that period, the Secretary of State must decide whether
to 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
35subsection (5) must specify—

(a) when 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
40under subsection (1) was published.

391N 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—