With the benefit of 6 months of working under the clunky new rules, I\u2019d expected (ok, I\u2019d hoped) that the revised SIP6 would address some of the practical issues arising from the new rules and that we\u2019d see clarity on some of the vague language of v1. The limited changes in v2 have done little to clear the fog. Did we miss the opportunity presented by the consultation to inform the regulators of our difficulties?<\/p>\n
You can access a tracked-changes comparison of the revised with the original SIP6 at: SIP6 comparisons to 01-01-18<\/a><\/p>\n In brief, the changes introduced by the revised SIP6 were:<\/p>\n My personal response to the SIP6 consultation is here: SIP_6_questionnaire_MB<\/a><\/p>\n <\/p>\n Should the S100 information be sent to creditors?<\/strong><\/p>\n The most material change is the method of disseminating the \u201ckey information likely to be of interest to prospective participants\u201d in the S100 decision process. It was hinted at when the original SIP6 was released: the RPBs\u2019 covering emails announcing the release on 10 March 2017 had indicated that the S100 information \u201cshould be available to creditors\u2026 where they request it\u201d. However, this non-binding note sat uncomfortably next to the SIP itself, which simply stated that the information \u201cshould ordinarily be available\u201d. The revised SIP6 now clarifies that the information \u201cshould ordinarily be available, on request\u201d, adding that it may be made available via a website.<\/p>\n I find this approach odd. Does this mean that IPs no longer need to compile the information as a matter of routine? Or would an IP be criticised for not having the information ready notwithstanding the absence of any requests? Granted, it would be a very brave IP that gambled on the chances that no one would ask for the information in view of the time it takes to compile it… but if the only creditors are HMRC and a couple of connected parties..?<\/p>\n The flip-side is: if no one asks for the information, is it still a \u201creasonable and necessary\u201d cost to compile it? As it seems that IPs are no longer strictly required to produce a report for every S100 \u2013 but only where a creditor requests it \u2013 I think it could be only a matter of time before part of an IP\u2019s S100 fee is challenged as not reasonable and necessary and therefore not strictly an allowable expense of the liquidation (R6.7(2)). Thanks, RPBs, for putting IPs between a rock and a hard place.<\/p>\n Personally, I disliked the original SIP6\u2019s hark-back to the S98 report. The Insolvency Service has given us a low-cost deemed consent route into liquidation. It seemed logical to me for SIP6 to follow through on this model. As we have broken away from physical S98 meetings, isn\u2019t the time over for deficiency accounts and lame reasons for the company\u2019s demise? Instead of putting the effort into providing creditors with information whilst operating under the company\u2019s instruction pre-liquidation, wouldn\u2019t it be more valuable to require the liquidator to provide such information once they\u2019ve had an opportunity to investigate matters, as in Administrations? Wouldn\u2019t this sit better with the image of the IP as office holder and help dispel the perception that they\u2019re cosy with the director?<\/p>\n Of course, some S100s will attract attention and it is only right that, where a meeting has been convened, those attending the meeting receive some answers to their questions (and the S100 pack may go some way to explaining the quantum\/basis of a prospective liquidator\u2019s proposed fee). However, to produce the copious amount of information required to meet SIP6 on the off-chance that someone will ask for it seems insensible. The SIP doesn\u2019t even require IPs to inform creditors that such information is <\/em>available on request.<\/p>\n \u00a0<\/strong><\/p>\n Elevating ethics<\/strong><\/p>\n SIP6 (both original and revised) stipulates that the required information \u201cfacilitates the making of an informed decision\u201d on the appointment of a liquidator. It had seemed to me that the only item in the original list of information that was truly relevant to this question was \u201cdetails of any prior involvement with the company or its directors that could reasonably be perceived as presenting a threat to that insolvency practitioner\u2019s objectivity\u201d: if the advising IP had become too embroiled in material events just prior to the liquidation, then creditors may decide to look for an independent liquidator.<\/p>\n In view of the fact that the SIP6 report is only provided on request, I think it is only right that this requirement is shifted out of the SIP6 report and into documents that are <\/em>issued to creditors. New paragraph 11 of SIP6 addresses this:<\/p>\n \u201cAn insolvency practitioner should disclose the extent of their (and that of their firm and\/or associates) prior involvement with the company or its directors or shareholders, any threats identified to compliance with the fundamental principles of the Insolvency Code of Ethics, and the safeguards applied to mitigate those threats. This disclosure should be made with the notices convening the deemed consent or decision procedure.\u201d<\/p><\/blockquote>\n This is a positive change, I think, and I do like the wider scope of this disclosure, which requires IPs to examine and explain the ethical threats presented by any prior involvement. But unfortunately it does mean that there is a new lack of transparency over the IPs\u2019\/firms\u2019\/associates\u2019 involvement after <\/em>the notices have been sent.<\/p>\n \u00a0<\/strong><\/p>\n Is that all?<\/strong><\/p>\n The only other change (other than semantics) was to drop the requirement for the notices to be sent on the same business day to all known prospective participants in the decision process (old SIP6 paragraph 8).<\/p>\n The SIP6 consultation closed on 13 October 2017. Granted, two months is a short time in the world of committees. It takes time to draft, redraft, achieve in-principle agreement, and then drive documents through RPBs\u2019 approval processes. I wonder if the emergent few changes have left those who worked on the project asking themselves if it was all worth the effort. Then again, perhaps the consultation responses gave them the feeling that we were all pretty-much happy with the SIP as it was.<\/p>\n <\/p>\n A missed opportunity?<\/strong><\/p>\n The SIP consultation had included some valuable questions exploring the difficulties encountered in applying the SIP and the new decision processes and asking where \u201cthe SIP fails to provide adequate direction\u201d. We were also asked whether creditors had fed back anything about the value of the SIP6 S100 information. Surely, the RPBs have accumulated some valuable responses, haven\u2019t they?<\/p>\n I accept that a SIP is not the place for guidance. It is there to address mischiefs and potential abuses. But, having asked the questions, I would hope that the RPBs received useful feedback, which could be used to help <\/em>us make the new rules work for all.<\/p>\n My own thoughts on where the SIP was unclear on exactly what was expected of IPs were:<\/p>\n Unfortunately, I think that those ambiguities remain in SIP6 v2.<\/p>\n Some other new areas that might have usefully been covered in the SIP are:<\/p>\n But the opportunities for such clarity and guidance have passed. As with so many other aspects of the new rules and other legislation, we have to get up to speed damned fast, faster than it seems the SIPs can move. I have no doubt that the face of S100s will continue to change, but whether we can expect any SIP6 v3 is doubtful.<\/p>\n","protected":false},"excerpt":{"rendered":" With the benefit of 6 months of working under the clunky new rules, I\u2019d expected (ok, I\u2019d hoped) that the revised SIP6 would address some of the practical issues arising from the new rules and that we\u2019d see clarity on … Continue reading \n
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