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Insolvency Service Issues Monitoring Report on Pre-packs
Service published its report on the first six months’ operation of
Statement of Insolvency Practice 16 (SIP 16) today.
The report looks at insolvency practitioners’ compliance with the SIP and whether the increased use of pre-packs has resulted in an increased incidence of directors’ misconduct, particularly in relation to the insolvent company’s debts being left unpaid whilst assets are sold on to a new company.
Graham Horne, The Deputy Chief Executive said, “Insolvency practitioners have generally been positive in their approach to the SIP and its aims, although there is still a fair way to go to ensure that creditors receive the information they need in a timely manner. We will be looking to strengthen SIP 16 to ensure it gives creditors what they want.”
He then went on to say, “On the information currently available, directors’ misconduct does not appear to be more prevalent in cases involving pre-packs than in other insolvencies.”
The Insolvency Service reviewed 572 SIP 16 reports. 65% were fully compliant with the disclosure requirements of the SIP. 3% of the cases reviewed were referred to the insolvency practitioners’ authorising bodies. The key failing was a lack of sufficient detail for creditors to be able to properly assess the merits of the sale.
The report covers the operation of the first six months under SIP 16. The main areas where reports fell down were:
Statements being issued to creditors late;Missing details of a valuation or marketing exercise;Omitting details of a connection between the insolvent company and the purchaser of its business.
The Insolvency Service will report again in early 2010.
The full report can be found on the insolvency service website
under, Policy Changes and Evaluation: http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/policychange/policychange.htm
1. The Insolvency Service carries out confidential enquiries on behalf of the Secretary of State for Business, Innovation and Skills, through the Companies Investigation Branch. The Service also authorises and regulates the insolvency profession; deals with disqualification of directors in corporate failures; assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay employees; provides banking and investment services for bankruptcy and liquidation estate funds; and advises ministers and other government departments on insolvency law and practice.
2. The SIP 16 reports reviewed can be broken down into three categories: 65% fully compliant with the SIP; 3% showing serious failures to comply; and 32% which either appear to be non-compliant in less serious ways, or which await further clarification by the insolvency practitioner.
3. Further information about the work of The Insolvency Service is available from: www.insolvency.gov.uk
4. Media enquiries should be directed to: Lorna Dennis, Communications Manager, Insolvency Service, 21 Bloomsbury Street, London, WC1B 3QW. Telephone: 020 7637 6279 or Ade Daramy, Press Officer on 020 7596 6187.