DOCSLIB.ORG

An Overview of Global Insolvency Regimes Mark Broude, Hervé Diogo Amengual, Frank Grell, John Houghton and Jake Redway, Latham & Watkins LLP

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
An Overview of Global Insolvency Regimes Mark Broude, Hervé Diogo Amengual, Frank Grell, John Houghton and Jake Redway, Latham & Watkins LLP 31 An Overview of Global Insolvency Regimes Mark Broude, Hervé Diogo Amengual, Frank Grell, John Houghton and Jake Redway, Latham & Watkins LLP INTRODUCTION equitable as possible. The main goals of Chapter 11 are to: 1) Rehabilitate financially viable businesses – preserving The insolvency regime or regimes that may be applicable to a operations and saving jobs particular borrower will often be a pivotal issue in work-out or 2) Ensure equality of distribution of value of the insolvent restructuring transactions, even where the transaction is company among the insolvent debtor’s similarly-situated intended to be out of court.The applicable laws will determine creditors when, for example, the directors' duties might change from 3) Maximise the value of assets and distributions to creditors being owed to the shareholders to the general body of credi- 4) Provide discharge from indebtedness and a “fresh start” to tors, and will often determine the point at which insolvency the debtor practitioners can look back at the antecedent transactions in an 5) Provide the debtor with time and ability to restructure bal- attempt to unwind them under the applicable insolvency laws. ance sheet and business They will also provide the backdrop for any negotiations, as the constituencies will measure any proposed recovery against These goals point out the primary reasons why a Chapter 11 the possible results from an in-court insolvency proceeding. case is substantially different from a case under chapter 7. In Furthermore, as more and more cross-border financing trans- a case under chapter 7 the debtor’s pre-petition management actions are being created, understanding the interplay between is replaced by a chapter 7 trustee whose sole purpose is not multiple insolvency regimes, and how one jurisdiction may the preservation of the debtor as a going concern but rather give effect to an insolvency proceeding commenced in anoth- the liquidation of the debtor’s assets for the highest price and er jurisdiction, will become increasingly important to the the distribution of the proceeds of sale in strict conformity negotiating dynamics in any attempt to craft an out-of-court with the absolute priority rule. Chapter 7 cases generally resolution to a "stressed" or "distressed" situation. involve businesses that have already ceased operations, and thus where there is no going concern value to preserve. Owing to internationalisation and the vast differences between insolvency regimes throughout jurisdictions, an Petitions and Automatic Stays overview of each of the regimes will now be provided for cer- In the US, a bankruptcy case is commenced by filing a peti- tain key markets throughout Europe and Asia Pacific. The tion, which is a form document listing estimates of the U.S is taken as a starting point, with a detailed look at debtor’s assets and liabilities and indicating its intention to Chapter 11 and Chapter 15. reorganise (Chapter 11) or liquidate (Chapter 7). Petitions can be either voluntary or involuntary. As soon as the volun- 1. THE UNITED STATES tary petition is filed, or an order for relief on an involuntary petition is entered, an automatic stay is in place. CHAPTER 11 OVERVIEW An automatic stay in the US Bankruptcy Code is a nation- Introduction to Chapter 11 wide injunction which comes into effect automatically and Chapter 11 of the US Bankruptcy Code was created with the instantly upon the filing of the petition or entry of the order intention of making the corporate reorganisation process as for relief, as the case may be, without regard to affected par- This article was first published in The Guide to Distressed Debt and Turnaround Investing by Private Equity International 32 The Guide to Distressed Debt & Turnaround Investing ties’ notice of bankruptcy filing or opportunity to contest the and thereby achieve the greatest return practicable for all con- imposition of the stay. The purpose of an automatic stay is to stituencies within the bounds of the absolute priority rule. provide a breathing spell for the Debtor in Possession (DIP), so that the DIP and other parties in interest have time to work out United States Trustee: is an arm of the US Department of the debtor’s financial problems and negotiate a plan of action. It Justice which oversees the conduct of bankruptcy cases. The also serves as a buffer from creditors, whose actions could other- US Trustee is responsible for the administration of most wise potentially destroy the debtor in the creditors’ scramble for bankruptcy cases. The US Trustee system was developed to relief. ensure that bankruptcy judges were freed from holding any administrative responsibilities for the debtor.The US Trustee The automatic stay applies to all of the debtor’s property and possesses standing to be heard as a party of interest and creditors, no matter where they are located. As a practical mat- enjoys broad immunity for acts taken in its official capacity. ter, it is difficult to enforce the automatic stay (or the US Bankruptcy Court’s jurisdiction generally) against a creditor that Chapter 11 Trustee: appointed in cases of major fraud or mis- does not do business, or otherwise have a presence, in the US. management. There is no automatic appointment of a Where a stay of actions by creditors who have no trustee in a Chapter 11 case. If appointed, the trustee may connection with the United States is important for a debtor, operate the debtor’s business during the pending Chapter 11 commencing an additional insolvency proceeding in the appro- case. Unless a creditor or other party in interest can show that priate jurisdiction may be required. In most situations involving there has been fraud, gross mismanagement or other malfea- such creditors, however, debtors frequently seek some authority sance, management will usually remain in place. from the bankruptcy court to pay foreign creditors (or at least those with no connection with the United States in the ordinary Official Committees: it is the norm for a committee of unse- course of their business). cured creditors to be formed during Chapter 11 cases. Such committees are typically composed of the seven unsecured Parties in Interest creditors with the largest unsecured claims who are willing to The US Bankruptcy Code has a very broad definition of “parties serve. The committee has fiduciary duties to all unsecured in interest”, who are the parties that have a right to be heard in creditors, but not to the other constituencies in the case. The a Chapter 11 case. Generally, any creditor (whether the credi- US Trustee may appoint as many additional committees as it tor’s claim is fixed, contingent on a future event, disputed or deems appropriate to assure adequate representation of cred- undisputed) and any stockholder (referred to in the Bankruptcy itors or of equity secure holders. In addition, a court may Code as an “equity security holder”) has a right to be heard by (though this is not frequent) direct the United States Trustee the bankruptcy court. Nevertheless, individual creditors or to appoint an official committee of equity holders or of shareholders generally will only come to court or negotiate with another constituency that the court determines to merit rep- the debtor on issues affecting them specifically. The rest of the resentation through an official committee. An official com- time, they will rely on the major players in the case to represent mittee has broad negotiating powers on behalf of the credi- the various constituencies. tor or shareholder body it is appointed to represent. Each official committee is generally empowered to employ, at the The major players in a Chapter 11 case are: expense of the debtor estate, accountants, lawyers and other Debtor in Possession (DIP): the debtor itself has fiduciary duties professionals to perform services for the committee. These to all of its creditors and shareholders. The DIP is supposed to professional advisors must meet a stringent standard of “dis- take those actions it believes will maximise the value of the estate interestedness” in order to serve on the matter. For instance, An Overview of Global Insolvency Regimes 33 to meet this standard, the advisor must not be a creditor of lease out of the ordinary course requires court approval, which is the debtor, meaning that claims for fees to be paid before a sought by motion, usually on at least 20 days’ notice. case is settled would disqualify the advisor from service. Cash Collateral Agent Bank(s)/Steering Committee: a secured bank group that Cash collateral is defined as the cash and cash equivalents in generally does not constitute an “official” committee. The possession of the estate, including any proceeds, product, off- Agent bank and a handful of other banks with large stakes spring, rents or profits of the estate, but solely to the extent that in the credit will usually negotiate on behalf of the entire such cash or equivalents are subject to a valid, perfected security group of creditors and, although they cannot bind the entire interest. A DIP or a Trustee is limited in its use of cash collat- group, they can help build consensus. The bank group rep- eral. It cannot use cash as collateral unless the secured creditor resents only the interests of its members; it does not have consents or the Bankruptcy Court authorises its use on the any obligations to other creditor constituencies. grounds that “adequate protection” is provided. Judicial System: The US has two levels of judicial oversight The Chapter 11 Claims Process for Chapter 11 cases, the US Bankruptcy Court and the There are two types of claims that can be filed under Chapter District Court or Bankruptcy Appellate Panel. The 11: secured claims and unsecured claims.
Load more

Recommended publications
  • Sovereign Defaults and Debt Restructurings: Historical Overview
    Sovereign Defaults and Debt Restructurings: 1 Historical Overview Debt crises and defaults by sovereigns—city-states, kingdoms, and empires—are as old as sovereign borrowing itself. The first recorded default goes back at least to the fourth century B.C., when ten out of thirteen Greek municipalities in the Attic Maritime Association de- faulted on loans from the Delos Temple (Winkler 1933). Most fiscal crises of European antiquity, however, seem to have been resolved through ‘‘currency debasement’’—namely, inflations or devaluations— rather than debt restructurings. Defaults cum debt restructurings picked up in the modern era, beginning with defaults in France, Spain, and Portugal in the mid-sixteenth centuries. Other European states fol- lowed in the seventeenth century, including Prussia in 1683, though France and Spain remained the leading defaulters, with a total of eight defaults and six defaults, respectively, between the sixteenth and the end of the eighteenth centuries (Reinhart, Rogoff, and Savastano 2003). Only in the nineteenth century, however, did debt crises, defaults, and debt restructurings—defined as changes in the originally envis- aged debt service payments, either after a default or under the threat of default—explode in terms of both numbers and geographical inci- dence. This was the by-product of increasing cross-border debt flows, newly independent governments, and the development of modern fi- nancial markets. In what follows, we begin with an overview of the main default and debt restructuring episodes of the last two hundred years.1 We next turn to the history of how debt crises were resolved. We end with a brief review of the creditor experience with sovereign debt since the 1850s.
    [Show full text]
  • FERC Vs. Bankruptcy Courts—The Battle Over Jurisdiction Continues
    FERC vs. Bankruptcy Courts—The Battle over Jurisdiction Continues By Hugh M. McDonald and Neil H. Butterklee* In energy industry bankruptcies, the issue of whether a U.S. bankruptcy court has sole and exclusive jurisdiction to determine a debtor’s motion to reject an executory contract has mostly involved a jurisdictional struggle involving the Federal Energy Regulatory Commission. The dearth of judicial (and legislative) guidance on this issue has led to shifting decisions and inconsistent outcomes leaving counterparties to contracts in still uncertain positions when a contract counterparty commences a bankruptcy case. The authors of this article discuss the jurisdiction conundrum. The COVID-19 pandemic has put pressure on all aspects of the United States economy, including the energy sector. Counterparties to energy-related contracts, such as power purchase agreements (“PPAs”) and transportation services agreements (“TSAs”), may need to commence bankruptcy cases to restructure their balance sheets and, as part of such restructuring, may seek to shed unprofitable or out-of-market contracts. However, this situation has created a new stage for the decades-old jurisdictional battle between bankruptcy courts and energy regulators. The U.S. Bankruptcy Code allows a debtor to assume or reject executory contracts with the approval of the bankruptcy judge presiding over the case.1 The standard employed by courts when assessing the debtor’s request to assume or reject is the business judgment standard. A debtor merely has to demonstrate that assumption or rejection is in the best interest of the estate and the debtor’s business. However, most energy-related contracts are subject to regulatory oversight by federal and/or state regulatory bodies, which, depending on the type of contract that is being terminated, apply different standards—most of which take into account public policy concerns.
    [Show full text]
  • II. the Onset of Insolvency Or Financial Distress
    Reproduced with permission from Corporate Practice Series, "Corporate Governance of Insolvent and Troubled Entities," Portfolio 109 (109 CPS II). Copyright 2017 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com II. The Onset of Insolvency or Financial Distress A. Introduction Because a Chapter 11 reorganization can be expensive and time consuming, a troubled corporation may seek to right itself through an out-of-court transaction—such as a recapitalization, merger or asset sale. These transactions and the directors' decisions concerning them are analyzed under state corporation law. Corporation law also provides a state law alternative to a Chapter 7 liquidation through procedures for voluntary and forced dissolution as well as ancillary remedies such as the appointment of a receiver to marshal a corporation's assets, sell those assets, distribute the proceeds to creditors, and take other steps to wind down a corporation. That said, as discussed below, state law insolvency proceedings have limitations that often make them an unsuitable alternative to federal bankruptcy proceedings. B. Director Duties in the `Zone of Insolvency' and Insolvency As discussed in Chapter I, § 141(a) of the DGCL gives directors the authority and power to manage a corporation, and in exercising that authority directors are subject to the fiduciary duties of care and loyalty. Under ordinary circumstances, these fiduciary duties require that directors maximize the value of the corporation for the benefit of its stockholders, who are the beneficiaries of any increase in the value of the corporation. When a corporation is insolvent, however, the value of the corporation's equity may be zero.
    [Show full text]
  • How Should Property Be Valued in a Cram Down?
    Mercer Law Review Volume 49 Number 3 Article 16 5-1998 How Should Property Be Valued In a Cram Down? Mark E. Beatty Follow this and additional works at: https://digitalcommons.law.mercer.edu/jour_mlr Part of the Bankruptcy Law Commons Recommended Citation Beatty, Mark E. (1998) "How Should Property Be Valued In a Cram Down?," Mercer Law Review: Vol. 49 : No. 3 , Article 16. Available at: https://digitalcommons.law.mercer.edu/jour_mlr/vol49/iss3/16 This Comment is brought to you for free and open access by the Journals at Mercer Law School Digital Commons. It has been accepted for inclusion in Mercer Law Review by an authorized editor of Mercer Law School Digital Commons. For more information, please contact [email protected]. Comments How Should Property Be Valued In a Cram Down? I. INTRODUCTION One of the most intriguing topics in bankruptcy law is the valuation of property in cram down cases, specifically Chapter 13 cases. This article will first present and discuss the different methods of valuation employed by the circuit courts before Associates Commercial Corp. v. Rash (Rash II)' was decided by the Supreme Court and the reasoning behind these methods. The next section will discuss the opinion in Rash and the chosen method of valuation in Chapter 13 cram down cases. The third section will discuss the implications of the decision in Rash. The Article will conclude with a proposed solution to the problems presented by the decision. 1. 117 S. Ct. 1879 (1997). 891 892 MERCER LAW REVIEW [Vol. 49 II. THE CIRcurr COURTS A.
    [Show full text]
  • UK (England and Wales)
    Restructuring and Insolvency 2006/07 Country Q&A UK (England and Wales) UK (England and Wales) Lyndon Norley, Partha Kar and Graham Lane, Kirkland and Ellis International LLP www.practicallaw.com/2-202-0910 SECURITY AND PRIORITIES ■ Floating charge. A floating charge can be taken over a variety of assets (both existing and future), which fluctuate from 1. What are the most common forms of security taken in rela- day to day. It is usually taken over a debtor's whole business tion to immovable and movable property? Are any specific and undertaking. formalities required for the creation of security by compa- nies? Unlike a fixed charge, a floating charge does not attach to a particular asset, but rather "floats" above one or more assets. During this time, the debtor is free to sell or dispose of the Immovable property assets without the creditor's consent. However, if a default specified in the charge document occurs, the floating charge The most common types of security for immovable property are: will "crystallise" into a fixed charge, which attaches to and encumbers specific assets. ■ Mortgage. A legal mortgage is the main form of security interest over real property. It historically involved legal title If a floating charge over all or substantially all of a com- to a debtor's property being transferred to the creditor as pany's assets has been created before 15 September 2003, security for a claim. The debtor retained possession of the it can be enforced by appointing an administrative receiver. property, but only recovered legal ownership when it repaid On default, the administrative receiver takes control of the the secured debt in full.
    [Show full text]
  • Individual Voluntary Arrangement Factsheet What Is an Individual Voluntary Arrangement (IVA)? an IVA Is a Legally Binding
    Individual Voluntary Arrangement Factsheet What is an An IVA is a legally binding arrangement supervised by a Licensed Unlike debt management products, an IVA is legally binding and Individual Insolvency Practitioner, the purpose of which is to enable an precludes all creditors from taking any enforcement action against Voluntary individual, sole trader or partner (the debtor) to reach a compromise the debtor post-agreement, assuming the debtor complies with the Arrangement with his creditors and avoid the consequences of bankruptcy. The his obligations in the IVA. (IVA)? compromise should offer a larger repayment towards the creditor’s debt than could otherwise be expected were the debtor to be made bankrupt. This is often facilitated by the debtor making contributions to the arrangement from his income over a designated period or from a third party contribution or other source that would not ordinarily be available to a trustee in bankruptcy. Who can An IVA is available to all individuals, sole traders and partners who It is also often used by sole traders and partners who have suffered benefit from are experiencing creditor pressure and it is used particularly by those problems with their business but wish to secure its survival as they it? who own their own property and wish to avoid the possibility of losing believe it will be profitable in the future. It enables them to make a it in the event they were made bankrupt. greater repayment to creditors than could otherwise be expected were they made bankrupt and the business consequently were to cease trading. The procedure In theory, it is envisaged that the debtor drafts proposals for In certain circumstances, when it is considered that the debtor in brief presentation to his creditors prior to instructing a nominee, (who requires protection from creditors taking enforcement action whilst must be a Licensed Insolvency Practitioner), to review them before the IVA proposal is being considered, the nominee can file the submission to creditors (or Court if seeking an Interim Order).
    [Show full text]
  • Creating a Framework for Sovereign Debt Restructuring That Works 1
    Creating a Framework for Sovereign Debt Restructuring that Works 1 Martin Guzman2 and Joseph E. Stiglitz3 Abstract Recent controversies surrounding sovereign debt restructurings show the weaknesses of the current market-based system in achieving efficient and fair solutions to sovereign debt crises. This article reviews the existing problems and proposes solutions. It argues that improvements in the language of contracts, although beneficial, cannot provide a comprehensive, efficient, and equitable solution to the problems faced in restructurings—but there are improvements within the contractual approach that should be implemented. Ultimately, the contractual approach must be complemented by a multinational legal framework that facilitates restructurings based on principles of efficiency and equity. Given the current geopolitical constraints, in the short-run we advocate the implementation of a “soft law” approach, built on the recognition of the limitations of the private contractual approach and on a set of principles – most importantly, the restoration of sovereign immunity – over which there may be consensus. We suggest that in a context of political economy tensions it should be impossible for a government to sign away the sovereign immunity either for itself or successor governments. The framework could be implemented through the United Nations, or it could prompt the creation of a new institution. Keywords: Sovereign Debt Crises, Sovereign Debt Restructuring, Debt Contracts, International Lending 1 We are indebted to Sebastian
    [Show full text]
  • Law Reform Commission of British Columbia Report on Floating Charges
    LAW REFORM COMMISSION OF BRITISH COLUMBIA REPORT ON FLOATING CHARGES ON LAND LRC 103 JANUARY 1989 The Law Reform Commission of British Columbia was established by the Law Reform Commission Act in 1969 and began functioning in 1970. The Commissioners are: ARTHUR L. CLOSE, Chairman HON. RONALD I. CHEFFINS, Q.C., Vice-Chairman MARY V. NEWBURY LYMAN R. ROBINSON, Q.C. PETER T. BURNS, Q.C. Thomas G. Anderson is Counsel to the Commission. J. Bruce McKinnon and Linda Reid are Legal Research Officers to the Commission. Sharon St. Michael is Secretary to the Commission. Text processing and technical copy preparation by Linda Grant. The Commission offices are located at Suite 601, Chancery Place, 865 Hornby St., Vancouver, B.C. V6Z 2H4. Canadian Cataloguing in Publication Data Law Reform Commission of British Columbia. Report on floating charges on land (LRC, ISSN 0843-6053; 103) ISBN 0-7718-8748-5 1. Floating charges. 2. Commercial loans - Law and legislation - British Columbia. 3. Security (Law) - British Columbia. 4. Real property - British Columbia. I. Title. II. Title: Floating charges on land. III. Series: LRC (Law Reform Commission of British Columbia); 103 KEB271.A72L38 1989 346.711'074 C89-092073-7 Table of Contents I. INTRODUCTION 1 A. General 1 B. Methodology 1 C. The Need for Flexible Security Over Land 2 D. The Future of the Floating Charge 3 E. The Scope of Reform 4 F. This Report 4 II. THE NEED FOR REFORM 5 A. Introduction 5 B. Overview of the Current Law 5 1. Common Law 5 2. Land Title Registration 5 3.
    [Show full text]
  • Irish Examinership: Post-Eircom a Look at Ireland's Fastest and Largest
    A look at Ireland’s fastest and largest restructuring through examinership and the implications for the process Irish examinership: post-eircom A look at Ireland’s fastest and largest restructuring through examinership and the implications for the process* David Baxter Tanya Sheridan A&L Goodbody, Dublin A&L Goodbody [email protected] The Irish telecommunications company eircom recently successfully concluded its restructuring through the Irish examinership process. This examinership is both the largest in terms of the overall quantum of debt that was restructured and also the largest successful restructuring through examinership in Ireland to date. The speed with which the restructuring of this strategically important company was concluded was due in large part to the degree of pre-negotiation between the company and its lenders before the process commenced. The eircom examinership demonstrated the degree to which an element of pre-negotiation can compliment the process. The advantages of the process, having been highlighted through the eircom examinership, might attract distressed companies from other EU jurisdictions to undertake a COMI shift to Ireland in order to avail of this process. he eircom examinership was notable for both the Irish High Court just 54 days after the companies Tsize of this debt restructuring and the speed in entered examinership. which the process was successfully concluded. In all, This restructuring also demonstrates the advantages €1.4bn of a total debt of approximately €4bn was of examinership as a ‘one-stop shop’: a flexible process written off the balance sheets of the eircom operating that allows for both the write-off of debt and the change companies.
    [Show full text]
  • Summary Rescue Process”
    COMPANY LAW REVIEW GROUP REPORT ADVISING ON A LEGAL STRUCTURE FOR THE RESCUE OF SMALL COMPANIES 22 OCTOBER 2020 1 | P a g e Contents Chairperson’s Letter to the Minister for Business, Enterprise and Innovation 4 1. Introduction to the Report 5 1.1. The Company Law Review Group ................................................................... 5 1.2 The Role of the CLRG ...................................................................................... 5 1.3 Policy Development........................................................................................ 5 1.4 Contact information ....................................................................................... 5 2. The Company Law Review Group Membership…………………………………………….….6 2.1 Membership of the Company Law Review Group ............................................ 6 3. The Work Programme ............................................................................................. 8 3.1 Introduction to the Work Programme ............................................................ 8 3.2 Company Law Review Group Work Programme 2018-2020 .............................. 8 3.3 Additional item to the Work Programme ........................................................ 9 3.4 Decision making process of the Company Law Review Group……………… ... ……..9 3.5 Committees of the Company Law Review Group ..... ….………………………………..…9 4. A Rescue Plan for SMEs ............................................................................................... 10 4.1 Introduction ................................................................................................
    [Show full text]
  • Insolvency, Security Interests and Creditor Protection Paul J. Omar
    INTERNATIONAL INSOLVENCY INSTITUTE Insolvency, Security Interests and Creditor Protection Paul J. Omar From The Paul J. Omar Collection in The International Insolvency Institute Academic Forum Collection http://www.iiiglobal.org/component/jdownloads/viewcategory/647.html International Insolvency Institute PMB 112 10332 Main Street Fairfax, Virginia 22030-2410 USA Email: [email protected] 1 Insolvency, Security Interests and Creditor Protection 1 10 Insolvency, Security Interests and Creditor Protection PAUL OMAR Introduction The purpose of this outline, featuring the relationship between insolvency, security and the protection of creditors’ interests, is to first ask what constitutes the essence of the procedures, known collectively as insolvency, and to outline the role of the creditor in the process. This chapter then looks at the role of debt in the financing of enterprises and its primary use for the acquisition of assets as well as the means by which creditors seek to protect their interests by agreements with their debtor envisaging the use of security. It continues by analysing the nature of security and differences in legal cultures to the protection of the most fundamental of creditors’ interests, the recovery of either physical assets the subject of the agreement or a sum representing the value of the debt. This outline follows this by sketching some of the hurdles facing creditors seeking to protect their interests when the debtor-creditor relationship transcends national boundaries. Because this inevitably involves potential conflict between legal rules and courts asserting jurisdiction, this outline will illustrate specific aspects of the conflict, where choice of law rules have had to be adapted to the specificities of insolvency.
    [Show full text]
  • TR19/1: Debt Management Sector Thematic Review
    Debt management sector thematic review Thematic Review TR19/01 March 2019 TR19/01 Financial Conduct Authority Debt management sector thematic review Contents 1 Executive summary 3 2 Background 6 3 Focus, scope and methodology 7 4 Our findings 8 5 Outcomes from the review 39 Annex Abbreviations used in this paper 40 2 TR19/01 Financial Conduct Authority Section 1 Debt management sector thematic review 1 Executive summary Background 1.1 The debt management sector is a priority area for the FCA and has been since the transfer of consumer credit regulation on 1 April 2014. 1.2 The FCA pays close attention to the sector, with regular intervention. This includes a thematic review in 2014/15 (TR15/8, ‘Quality of debt management advice’ (June 2015)) and sector-wide communications in 2015 and 2016. 1.3 Our previous thematic review in 2014/15 found that debt advice received by customers was very poor, and firms were treating customers unfairly. Firms were carrying out poor assessments of customers’ circumstances, both personal and financial, before giving advice. This led to interventions across the sector including past business reviews and remedial actions by firms. 1.4 We committed in our 2017/18 Business Plan to assess how the market is operating and whether firms are meeting customer needs and our standards. This review included both commercial debt management firms and not-for-profit debt advice bodies. Key findings 1.5 Our findings show many improvements have been made since the 2014/15 thematic review, but firms need to work harder to make sure they consistently deliver good outcomes.
    [Show full text]