Insolvencies will not be regulated by a single body, after the government dropped plans to create a solo watchdog for the sector.
Ministers had proposed setting up a single regulator of insolvency practitioners to run within the insolvency service – but have since reversed on the idea.
The move comes as high street retailer Wilko faces insolvency, after weeks of talks failed to bring about a buyer for the brand and most of the stores.
The proposed insolvency service would have replaced the four existing regulators which will now continue to oversee the profession amid a series of reforms, including a new public register of practitioners.
Enterprise and markets minister Kevin Hollinrake said the UK’s insolvency sector was “highly respected” worldwide but admitted “there continue to be instances of poor conduct”.
He said: “This forward-looking package of reforms reaffirms the government’s commitment to ensuring the profession is effectively regulated, with a regulatory framework fit for the future.
“These reforms will deliver transformational improvements, modernise the regime, and, crucially, increase public confidence.”
Measures include introducing the regulation of firms offering insolvency services, to bring them in line with audit and legal standards, when previously only individuals were regulated.
Officials say this move will overhaul the system and ensure greater protection for clients.
Frances Coulson, from law firm Wedlake Bell, said the changes would “enable regulators to deal with systemic failures, not just breaches by individuals”.
While the new public register will list all firms and individuals and note whether they are subject to sanctions by a regulator, in a bid to boost transparency and raise standards, and consultation on a new compensation scheme for mistakes or misconduct will take place.
But Caroline Sumner, chief executive of trade body R3, told The Times she was concerned such a redress scheme could lead to a “wave of unsubstantiated claims”.
However, the government says it will still give itself the power to create a single regulator in the future, should such a move prove necessary, and will keep conditions under review.