Pre-pack Administrations - the new SIP 16
The new Statement of Insolvency Practice 16 comes into effect on 1 November 2013 and emphasises the importance of transparency in pre-pack administration sales.
More reminders of the primacy of the interests of the creditors as a whole would have been valuable. However, their absence emphasises the distinction between such a fundamental concept, which is enshrined in the Insolvency Act, and the purpose of SIP 16 – to give professional guidance to IPs on the communication they should undertake in pre-packs.
The key element of that communication is to give a clear, full and timely explanation of what has happened. It is absolutely imperative that such clarity is not lost in a checklist of facts.
The new SIP 16 distinguishes between the roles of the IP in advising the company pre-appointment and when acting as office holder. It is instructive, however, to consider the similarities between the IP’s pre- and post-appointment duties and their congruence with directors’ duties. The IP (and the directors) should be acting in the interests of the creditors throughout the exercise. Of course, if the directors fail so to act, the IP will include that failure in his consideration of the directors’ conduct.
IPs should follow carefully the guidance of the new SIP, but they must ensure that they carry out their statutory and fiduciary duties.
Date: 7th October, 2013
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