The insolvency profession plays an important role in the insolvency system. It is now well established that where a jurisdiction has a well-developed cadre of insolvency professionals, who ascribe to the highest standards, together with the appropriate oversight, the insolvency system function effectively and efficiently. A competent and recognized insolvency profession can overcome gaps in the legislative framework and make the system work for the benefit of all. Their stature, trust and skill enable them to bridge the differences that the various stakeholders will have and help ensure that the business assets are deployed to maximize value.
Well-qualified and respected insolvency practitioners command respect from and the attention of all of the enterprise’s stakeholders as they seek achievement of a resolution that maximizes the economic value in a manner in which the participants trust and is least disruptive to the economy. A robust insolvency system seeks to achieve the appropriate balance between the debtor and its creditors, rehabilitation and liquidation, as amongst creditors while preserving their negotiated rights and ensuring that preferential transactions are appropriately addressed and misfeasance is effectively addressed. The insolvency system relies heavily on the insolvency professional to get this balance correct. His role is also critical in effecting the insolvency proceeding in a timely manner. The role, powers and nature of the insolvency practitioner must complement and facilitate this process; in fact in can be argued should be a key driver of the process.
A competent and recognized insolvency profession can overcome gaps in the legislative framework and make the system work for the benefit of all. Their stature, trust and skill enable them to bridge the differences that the various stakeholders will have and help ensure that the business assets are deployed to maximize value. Thus the insolvency system should provide a suitable framework for Insolvency Professional. It is important however, that the role of the insolvency professional fit with societal expectations.
The qualifications and quality of the insolvency profession operating in the system determines substantially the success or failure of the insolvency law. Equally important requirement are the personal qualities of those who seek to be insolvency practitioners. These include such qualities as integrity, impartiality, and independence. The complexity of the insolvency and restructuring assignments requires that those involved in resolving them are suitably qualified. These qualifications should include a good knowledge of the law (not only insolvency law, but also relevant commercial, financial, labour and business law) as well as adequate experience in commercial andfinancial matters, including accounting to an extent. An individual should possess good interpersonal skills, an ability to communicate clearly and to reconcile the stakeholders’ different positions. They need good management skills. They will be required to balance commercial reality with legal requirements all in the context of ensuring the entitlements of others such as creditors and potentially the public interest. Whether or not the individual should possess specialized expertise in the enterprises particular business should be balanced against the ability to retain experts.
Integrity should require that the individual have a sound reputation and no criminal record or record of financial wrongdoing. It is also critical that the insolvency practitioner be and be able to demonstrate that they are independent from vested interests, whether of an economic, familial or other nature. The insolvency law should include both, principled guidance on conflicts of interest together with the positive obligation to make meaningful disclosure of potential and existing conflicts of interest.
The standard of care to be employed by the insolvency administrator and its personal liability are important in the conduct of insolvency proceedings. The establishment of a measure for the care, diligence and skill with which the insolvency professional carries out its duties and functions, usually in difficult circumstances, is vital. Where the insolvency administrator is required to incur liabilities to others, such as may arise from continuing the business in the ordinary course, the law must balance payment certainty with requiring the insolvency professional from inordinate risk. One solution is to limit the liability to the assets in the estate.
The regulation of the insolvency professional can be achieved either through statutory professional bodies or by a specially mandated department of government. Regulatory oversight of the insolvency profession, by its very nature,restricts entry to those that meet the necessary qualifications and attributes. Stringent requirements, though somewhat restrictive, facilitate appointment of highly qualified individuals and assure a level of the quality of service required. Stringent requirements can provide greatest benefit even though potentially resulting in higher fees charged than if there was unrestricted access. We believe this is a small price to pay, as it is of paramount importance that the business and financial community, the employees of distressed enterprises and various government agencies all have confidence and trust in those charged with either the rehabilitation or liquidation process, and assist in providing an efficient resolution. They are agents of all of those who collectively have to accept an outcome different from that which they bargained. Legislation, which provides a mechanism to permit access to the courts, by stakeholders seeking a review of the conduct or costs of the insolvency professional help in ensuring there, is the proper balance.
One of the thorniest issues is that of the insolvency practitioner’s remuneration. The remuneration should be commensurate with the qualifications required and the tasks to be performed and should achieve a balance between risk and reward in order to attract appropriately qualified professionals. It should encourage that an appropriate level of care, diligence, skill and creativity be exercised. While there are different methods of fixing remuneration, including time based systems or commission or percentage based systems or some combination of both, there should be provision in the law, where a stakeholder has concerns for an independent review, including judicial. This safeguard coupled with disclosure to the creditors and other stakeholders and a competitive market all help ensure that value is delivered. Any remuneration system should recognize that there are certain tasks or investigations that will be mandatory requirements and provision for the costs thereof should be part of whatever approach is adopted.
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