Regardless of whether we think that Teresa Graham’s recommendations will reduce the pre-pack “noise” (if it still exists at all), we now have a new SIP16 to implement from today.
The Pre-Pack Pool has drawn the headlines, but the SIP contains many other changes that have far more impact on our work and have far more potential to trip us up. In this post, I will set out what we think generally needs changing and briefly how.
If you would prefer to listen to this information, as well as some more guidance on putting the new SIP16 into practice, then you might like to sign up to my webinar that I’ll be presenting later this month. I’ll also be covering the new SIP9 (gulp!). If you’re interested, please drop a line to email@example.com for more information.
Alternatively, if you want to avoid fretting about whether you’ve fixed your standard documents to meet all the details of the new SIP16, you could always subscribe to our document packs.
Here is a list of the documents that are primarily affected by the SIP16 changes (although of course particularly as regards internal processes, the details may differ from firm to firm):
Directors’ engagement/advice letter
The pre and post-appointment roles of the IP need to be explained. The Company should also be advised that valuations should be carried out by appropriate valuers/advisers with adequate PII.
Letter to connected party
Any connected party considering a pre-pack purchase should be made aware of their ability to approach the pre-pack pool and the potential for enhanced stakeholder confidence from approaching the pool and preparing a viability statement for the purchasing entity. They should also be encouraged to seek independent advice.
Decision to pre-pack and other internal documents
You will probably want to beef up your internal document detailing the reasoning behind the decision to pre-pack and the alternatives considered. Make sure also that justification and documentation of the marketing decided on and undertaken and the results achieved are recorded contemporaneously so that you can demonstrate compliance with the SIP and draft up the SIP16 Statement.
Communication with agents
You may want to set out some of the SIP16 requirements to the agents, particularly the marketing essentials, so that you ensure that the marketing and media strategy is compliant (or, if not, that divergences are for good reasons that can be explained to creditors). This would be a useful opportunity also to seek information on the agents’ PII and confirmation of their independence.
You might also want to ask the agents to help articulate explanations for the strategy used for your SIP16 Statement to creditors.
Of course, in future SIP16 Statements will need to address the involvement (or not) of the pre-pack pool and any viability statement, where the sale involves a connected party. The Statement also needs to refer to the SIP’s marketing essentials: how they have been followed or, if they have not, why not and why the administrator relied on the marketing.
However, the SIP16 disclosure requirements include several other small additions/changes – for example, disclosure of (former) directors or associates involved in financing the purchasing entity (previously it was only those involved in management or ownership and it did not extend to associates); and the need to confirm that the “outcome achieved was the best available outcome for creditors as a whole in all the circumstances” (previously the words required were: “the sale price achieved was the best reasonably obtainable in all the circumstances).
These small changes and additions mean that a line-by-line comparison of your templates with the new SIP16 might be valuable in order to ensure that you have every item covered.
In addition, the pre and post-appointment roles of the IP should be explained to creditors (and don’t forget the SIP1 addition regarding the Insolvency Code of Ethics, if this is your first contact with creditors).
You will also want to make sure that you follow through any changes in your SIP16 Statement to your Administrator’s Proposals template.
SIP16 Statement to the Regulator
Rather than send your SIP16 Statement to the Insolvency Service, ensure that your staff know to whom to send the Statement in future – most likely either SIP16@icaew.com or firstname.lastname@example.org, depending on the authorising body of the lead IP.
What with the fees changes, all the other 1 October changes, and the new SIP9, if you’re feeling a little complianced-out, we sympathise! If we can help, please do get in touch.