Comply or explain—understanding SIP 16

Comply or explain—understanding SIP 16

Alison Curry, head of regulatory standards and support at the Insolvency Practitioners Association, outlines what insolvency practitioners need to know about the new SIP 16.

Original news

Insolvency Service issues revised SIP 16

A revised version of the Statement of Insolvency Practice 16 (SIP 16) from the Insolvency Service, covering pre-packaged sales in administrations, will be effective from 1 November 2015. The SIP 16 has been revised to take into account the recommendations included in a recent independent report into pre-pack administration, and will apply UK-wide.

What changes does the new SIP 16 make to pre-pack sales in administration?

The main changes are the introduction of Teresa Graham’s ‘marketing essentials’ which mandate more extensive marketing of a business prior to a pre-packaged sale than might have historically been the case or, alternatively, obligate the insolvency practitioners (IPs) to explain why this was not conducted. Other significant changes include:

  • a requirement that IPs make prospective connected party purchasers aware of the pre-pack pool, and
  • the potential for enhanced stakeholder confidence as a result of the connected party approaching the pool and preparing a viability statement for the ongoing business, explaining what they intend to do differently

Are there any significant amends to the draft SIP 16 released earlier in the year?

No, the SIP is substantially unchanged. The delay in issuing the SIP was necessitated by the need to time the issuing of the SIP with the pre-pack pool becoming operational.

Do you think that IPs’ duties surrounding the sales and the marketing of assets have become more onerous as a result of this new SIP?

There is certainly greater emphasis placed on marketing within the new SIP, but the requirement to market the business or explain the reasons for not having done so is not a new one. The new SIP provides greater clarity about what form marketing should ideally take, and therefore ought to assist IPs in understanding the expectations upon them.

Is the pre-pack pool now up and running?

The pre-pack pool is due to commence its operations on 2 November 2015.

How does the pre-pack pool work in practice?

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.