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amended SIP 16 has come into force

4 November 2013

A revised version of the Statement of Insolvency Practice (SIPs) came into force on 1 November 2013. As a result of the amended SIP, the Insolvency Service has confirmed that the advice given in Dear IP 42(2009) will be withdrawn tomorrow as the new SIP comes into force.

The main aims of the amendments are to improve the transparency of the pre-packaged sales in administration, ensuring that creditors and other interested parties are confident that the insolvency practitioner has acted professionally and objectively. Some of the key changes are set out below.

Detailed explanation and justification of the pre-pack saleThe changes to SIP 16 now require the administrator to provide a detailed narrative explanation to creditors as to why a pre-pack sale was appropriate in the circumstances. The explanation should include:

  • a statement as to how the transaction meets the statutory purpose
  • confirmation that the sale price is the best price that could have been reasonably achieved
  • the information set down by the new Annex to SIP 16, unless there are exceptional circumstances whereby this is not required.

This explanation and justification for the pre-pack sale must also be filed at Companies House as part of the administrators statement of proposals.

Disclosure requirements - the new AnnexThere is a new annex to SIP 16 which sets out in detail the information that needs to be disclosed to creditors. The annex includes the need to disclose (amongst other things):

  • details of the source and date of the initial introduction to the insolvency practitioner
  • the alternative courses of action that were considered, and the alternative financial outcomes
  • why it was not possible or appropriate to trade the business
  • the results of marketing activities conducted or the reasons as to why marketing may have not been undertaken
  • details of the valuations that were obtained, including who the valuations were provided by and how the valuations compare with the actual sale price
  • a breakdown of how the sale consideration is apportioned, for example into fixed and floating charge realisations
  • details of the charges registered against the company with the dates of their creation
  • details of any transactions where the business may have acquired assets from another insolvency practitioner in the 24 months before the pre-pack sale
  • the identity of the purchaser and whether any former directors are involved in the management or ownership of the purchaser.

Timings in relation to sending out the pre-pack statementThe administrator must provide creditors with a SIP 16 statement within seven calendar days from the date of the transaction. If this is not possible, a reasonable explanation for the delay will need to be provided.

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