The Society of Practitioners of Insolvency (SPI) is taking its first steps towards recognising the broadening role of the insolvency practitioner. On 22 January, it voted to proceed with the proposal to create a new organisation which will represent the whole of the insolvency and restructuring industry, from traditional insolvency practitioners through to workout and 'turnaround' professionals.
Even the SPI's journal, Insolvency Practitioner, is to be renamed Recovery this month.
"We perceive this as the way the market is going," says Stephen Gale, head of insolvency at Herbert Smith and the SPI's vice president from next April. "There is a clear need for both groups of professionals to work together."
Current chairman, Murdoch McKillop of Arthur Andersen explains the rationale. "The trend is to try to find ways of resolving things informally. Many insolvency professionals are very skilled at corporate recovery and workout, but the problem the profession has is that they are perceived as being the undertakers coming along to measure up the coffin," he says.
"I see the whole area as a spectrum. At one end, you have pure liquidation, then receiverships and administrations through to workout and 'turn around', then business improvement for under-performing companies. Where we draw the line is where there is a real threat, say within 12 months, of that business being in trouble. The rest we can leave to the management consultants."
McKillop is keen to emphasise that the SPI's aim is to create a new and separate organisation rather than simply broaden its franchise and the SPI will continue to function as a distinct entity. "It is important for us all that the focus on pure insolvency is not dropped," McKillop explains. "That is what is so interesting about Southeast Asia – the informal process does not work unless there is a robust formal insolvency business. If you don't have the stick of the formal process, all you get is stand-off and stagnation.
"Equally, there are a number of people in the
business recovery sector who quite deliberately are not insolvency practitioners and don't want to be closely associated. This is the challenge we are still working on – trying to find the right balance."
Gale's challenge is to persuade SPI members that the new organisation is the way forward. Although the initial proposal to take the process further gained the required 75% of votes the week before last, Gale stresses that it is still early days. "We now have the job of adding the detail to the concept, explaining the detail to the membership and getting the correct response. Most people are supportive of this in broad principle and I would hope that we
can persuade the necessary 75% of members.
We have devoted a huge amount of time to this proposal.
"If we don't proceed, a separate turnaround group will be established which many of our members will need to join. The traditional tool was the insolvency appointment. Now this is only used in extremis. Practitioners have a range of tools now – it is a slightly different market."
McKillop sees the move as one more stage in a process that has been developing since the 1960s. "It has been an evolutionary course which has been refined over time. First it was receiverships, then administrations were introduced in 1986. In the 1990s, it was realised that we can apply some of these techniques, but not necessarily in a formal process," he says.
"I like to think of people in this business now as being like company vets – they try to save the animal, but if it can't be saved, then at least make sure it is put down humanely."