Insolvency Bonds: History, Policy and Substance

Abstract

IPs became the subject of increased professional scrutiny as a result of the Cork Report's recommendations and the subsequent Insolvency Act 1986 (IA86) reforms. Before those reforms certain conduct was identified that brought some practices into disrepute. One of the principal safety mechanisms that exists to deal with the consequences of the most serious form of IP misconduct, namely fraud and dishonesty, is the bond. It is a requirement of the IA86 that a person cannot take an appointment as an IP unless, “there is in force security which meets the prescribed requirements.” This requirement is the bond. This paper examines the historical background, policy formulation and rationale for bonds.