“Key recommendation 1: Pre-pack Pool. On a voluntary basis, connected parties approach a ‘pre-pack pool’ before the sale and disclose details of the deal, for the pool member to opine on.
Key Recommendation 2: Viability Review. On a voluntary basis, the connected party completes a ‘viability review’ on the new company.
Recommendation 3: SIP 16: that the Joint Insolvency Committee considers, at the earliest opportunity, the redrafted SIP16 in Annex A.
Recommendation 4: Marketing: that all marketing of businesses that pre-pack comply with six principles of good marketing and that any deviation from these principles be brought to creditors’ attention.
Recommendation 5: Valuations: SIP16 be amended to the effect that valuations must be carried out by a valuer who holds professional indemnity insurance.
Recommendation 6: SIP 16: that the Insolvency Service withdraws from monitoring SIP16 statements and that monitoring is picked up by the Recognised Professional Bodies.
Should these measures fail to have the desired impact and they are not adopted as I would hope by the market, then Government should consider legislating.”
Annex A, Ms Graham’s suggested SIP 16 redraft for consideration by JIC, appears on Page 69 of the Graham Review Report. Annexes H and J “Considerations for the Pool” and the suggested drafts for their sign-offs appear on pages 90 and 95 respectively.
Whilst it is welcome that Ms Graham recognises (as Sandra Frisbee did) the benefits of pre-packs, it seems unnecessary to impose a pool of businessmen over the qualified IP, which businessman is supposed to give a view (without liability) on a business in half a day’s work.
I still favour trusting the IP, who may well also have undertaken the IBR and let them as the courts exercise their professional and commercial judgment.
However, I do still favour the liquidation exit with a new IP in particular for prepacks to connected parties. This gives a check and balance to the freedown to rescue the business and act quickly unfettered.
I also note that the HMRC debt quoted is, as she says, taken from statements of affairs provided by directors, but in the worst cases the HMRC debt can be significantly understated.
I welcome the suggestions for independent and insured valuers and think a requirement for proper instructions and reports would also improve some scenarios. That will be driven by insurer requirements no doubt.
The Government has also published today its response, (here) agreeing with the report and saying that it will seek to implement its recommendations as well as strengthen the regulatory regime in respect of Insolvency Practitioners:
“Detail of outcome
When Parliamentary time allows, we will bring forward measures which will:
Introduce regulatory objectives.
Increase the powers of oversight regulator to sanction a regulator.
Provide the oversight regulator with a power, where it is in the public interest, to apply to court for a sanction against an Insolvency Practitioner (IP).
Enable the oversight regulator to require information from the regulators, an IP, or persons connected to the IP, in order to carry out his oversight role.
Reserve power to replace the regulators with a sole regulatory body.
We will be discussing further with interested parties the proposals to restrict the use of time and rate charging in certain circumstances. Our aim remains to ensure that insolvency practitioners receive fair remuneration for work properly carried out but also that creditors are getting the greatest return possible in the circumstances.”
Pre packs aside, the Regulators now face a challenge to retain their status, and IPs face further challenges to their fees.
It is inevitable that there will be some tightening on fees but the profession should stand up for the broadly good job it does and continue to remind the Government of the huge amounts of write offs it suffers in relation to its true fees.
Will we finally see a single regulator? I still think there should be a choice of two, there are pure insolvency firms who will want a pre insolvency regulator and there are mixed practice firms who will not want to duplicate compliance visits with two regulators. Competition amongst regulators is no bad thing for those they license nor for the public; it probably enhances regulation.
Frances Coulson (firstname.lastname@example.org)
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