Consultation on Statement of Insolvency Practice 3.1 (Individual Voluntary Arrangements)
The Joint Insolvency Committee (JIC) is consulting on changes to Statement of Insolvency Practice (SIP) 3.1 (Individual Voluntary Arrangements).
The JIC undertook a consultation issued in May 2020, which included revisions to SIP 3.1. At the time, these revisions had been identified as being relevant changes as part of a review of SIP 3.2 (Company Voluntary Arrangements). No detailed review of SIP 3.1 was carried out at that time. This consultation builds on the work carried out in 2020, and the draft revised SIP 3.1 now being consulted on follows a detailed review of the SIP.
The review was carried out by a JIC working group comprising insolvency professionals and other participants in the Individual Voluntary Arrangement (IVA) process, including HMRC and the Insolvency Service.
SIP 3.1 was last updated in 2014. Since that date, the IVA market has changed considerably, both in terms of the numbers of IVAs commencing each year (c. 51,000 in 2014 to c. 78,000 in 20191) and with the growth of ‘volume providers’ (VPs)2.
Although operating within the same statutory and regulatory framework as other insolvency practitioners, the VPs apply a different business model that relies on a standardised product and computer-assisted case management to meet client debtors’ demand for IVAs.
There has also been a growth in providers of pre-insolvency services. These include lead generators and debt packagers, some activities of which are regulated by the Financial Conduct Authority (FCA).
The draft revised SIP 3.1 places more emphasis on the advice stage of the debt solution process and aims to make more explicit an Insolvency Practitioner’s (IP’s) responsibility to have procedures in place to ascertain whether the debtor has received adequate and appropriate advice on the options available to them.
The draft revised SIP 3.1 incudes a greater emphasis on documenting the process, including, where appropriate, advice calls. It also includes greater emphasis on providing information to creditors that is more extensive and useful to them than before.
The consultation will commence on 12 August 2021 and will be open for a period of 12 weeks, closing on 5 November 2021.
There is no intention to amend SIP 3.1 without careful consideration of the responses received, and any plan to introduce changes will take into account any continuing challenges faced by the insolvency profession.
The JIC is now seeking views on the proposed changes to SIP 3.1, and there is an opportunity in the consultation questionnaire to suggest other changes to the SIP.
SIP 3.1 applies in England and Wales, and Northern Ireland. A separate review of SIP 3.3 on Trust Deeds, which applies in Scotland, is being undertaken and will be subject to a separate consultation in due course.
Click here to access the consultation questionnaire.
Click here to view the changes to the SIP.
1 Source: Insolvency Service “Individual Voluntary Arrangements Outcomes and Providers, 2020”
2 VPs are defined in the Insolvency Service Guidance “Monitoring Volume Individual Voluntary Arrangement and Protected Trust Deed Providers” as “…a firm that controls greater than 2% of the total market (including new and existing cases), or 10% for PTDs, or greater than 2% of new cases over a three-month period.”