Brett Barton
Brett's recent articles
- Directors' remuneration - caution required
21st January - Three in four 'dodgy' directors go unpunished
20th October - Where can I find cash?
12th February
Happy New Year
7th January 2009 09:12
Over the Christmas period many of my friends commented upon the media and that they were afraid to turn on the radio or the television in the morning in fear of being caught under a wave of doom and gloom reporting. Therefore, in my first blog for 2009, I will not talk about ways of surviving the recession but will focus on some regulatory changes in the Insolvency sector that came into force on 1 January.
These were the introduction of an updated and more comprehensive guide to our ethical code and the introduction of a new SIP 16 (“Statement of Insolvency Practice”), the first since 2005, which is entitled “Pre-Packaged Sales In Administration”.
In recent years unsecured creditors have raised questions over the use of pre-packs – the process where a buyer is sought out and negotiated with for a struggling business before it goes into Administration (Whittards of Chelsea and The Officers’ Club being just two examples). Since the introduction of the Enterprise Act 2002, which simplified the process of a company entering into Administration, these deals have become more widely used. The core idea is actually sound in many ways as it allows an Administrator to sell a business to a party with resources before that business is badly damaged by negative publicity; this is especially true regarding businesses that have suffered badly with cash flow problems, often on a short term basis. Pre-packing also allows a business to change hands smoothly and with greater efficiency than may otherwise prove possible. They have proven to be a low cost method of transferring the businesses and protecting the jobs of the majority of the staff.
SIP 16 has been introduced to provide some guidance to Insolvency Practitioners on how a pre-pack sale should be conducted and what information should be disclosed to the creditors. The aim of SIP 16 is to make the process as transparent as possible and have a more consistent disclosure of information that is reported to the creditors.
I think this is a positive step and will seek to address some of the concerns of creditors. If you would like more information about SIP 16 then please contact me.
