Updated Statements of Insolvency Practice
Other articles (Insolvency Practitioner, April 2021):
- Michelle Thorp, CEO
- Kevin Hellard, President
- Important reminder: Annual General Meeting
- IPA events update
- Consultative Committee of Accountancy Bodies AML guidance
- Future IPA AML regulation: What members can expect
- Richard Long becomes an Honorary IPA member
- How IPs can save history
- Case law update
- Guest article: IPs of FCA authorised companies in voluntary liquidation face more new and difficult challenges
The Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021, which are due to come into effect on 30 April 2021, will impose additional obligations on connected person purchasers in administrations.
These legislative changes mean that changes need to be made to Statement of Insolvency Practice (SIP) 16 (pre-packaged sales in administrations). Additionally, SIP 13 (disposal of assets to connected parties in an insolvency process) needs to be changed to align the content of the standards with the law. No changes have been made to the SIPs other than those required by the change in the law.
The Joint Insolvency Committee (JIC) has amended SIP 16 to remove references to the Pre-Pack Pool and to replace them with reference to the statutory obligation placed on a connected person purchaser to obtain the opinion of an evaluator. The regulations apply to transactions that take place within eight weeks of the appointment of an administrator. This extends the scope of the regulations beyond pre-pack administrations to all administrations within that time frame. This means that equivalent changes had to be made to SIP 13 as it applies to any connected party transaction in an insolvency process.
The new SIPs will apply effective from 30 April 2021.
Northern Ireland has yet to enact equivalent legislation, though it is expected to adopt similar requirements by 29 June 2021. Until that time, the changes to SIP 16 and SIP 13 will only apply in England & Wales and Scotland.
SIP 4 (disqualification of directors)
When new legislative provisions for the reporting obligations of insolvency office holders on the conduct of those who formerly controlled a company came into effect from 6 April 2016, it was intended that SIP 4 (disqualification of directors) would be withdrawn.
However, there were still some ongoing cases where an office holder was able to submit a paper conduct return, rather than use the online reporting tool. The Insolvency Service has informed the JIC that all such cases should now be complete. SIP 4 will therefore be withdrawn effective 30 April 2021.
You can access the new SIPs here on the IPA website.
Addendum – Changes to SIP 9 (Payments to insolvency office holders and their associates)
Further to our email of 10 March 2021, on the revisions to SIP 9, the explanatory statement was not sufficiently clear. We apologise and have amended the text on our website in order to clarify this. The text now reads as follows:
The requirements for creditor approval of disbursements have been extended to cover all expenses, irrespective of whether they are paid firstly by the office holder, their firm or direct from the estate. The test for requiring authorisation prior to payment now applies to expenses, divided into Category 1 and Category 2 expenses, not just to disbursements. The categorisation depends on who provides the service to the estate, rather than how they are paid. Category 1 expenses can be paid without prior approval. Category 2 expenses are payments to associates or which have an element of shared costs. Before being paid, Category 2 expenses require approval.
You can view the updated text here.