Does SIP 3 consultation go far enough?

Does SIP 3 consultation go far enough?

What should insolvency practitioners (IPs) consider in light of the recent consultation on proposed revisions to Statement of Insolvency Practice 3 (SIP 3) on company voluntary arrangements (CVAs)?

The Joint Insolvency Committee (JIC) is consulting on a revised SIP 3 for CVAs. Various bodies, including the Insolvency Practitioners Association (IPA), are seeking comments by 7 January 2014. 

What is being proposed?

SIP 3 currently covers both CVAs and individual voluntary arrangements (IVAs). In spring 2013, the JIC consulted on a revised version of SIP 3 for IVAs and also announced that steps were being taken to produce separate SIPs for IVAs and CVAs as these were very different processes. The new draft SIP 3.2 (CVAs) should be reviewed in full to consider its impact and implications. However, some of the main points are:

  1. clarification of the separate roles of an insolvency practitioner (IP) when acting as adviser, nominee and supervisor
  2. emphasis on the need for IPs to put in place procedures to ensure they provide sufficient information to:

(i) directors to allow them to consider all the options and explain the IP's various roles, and

(ii) shareholders and creditors to consider the CVA proposal.

Are there any areas for debate?

The proposed revisions to SIP 3 have sparked debate as to whether they go far enough, especially where the IP proposes the CVA or where fees are uncapped. There is also debate as to whether there are conflicts of interest when the IP acts as adviser to the company and subsequently acts as a supervisor.

However, it should be remembered that IPs are heavily regulated and nominees already must report to court on whether the proposed CVA has a reasonable prospect of being approved and implemented.

What do you think? Do the regulations go far enough? We’d love to hear your views. Please leave a comment below.


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About the author:
Kathy specialises in restructuring and cross-border insolvency. She qualified as a solicitor in 1995 and has since worked for Weil Gotshal & Manges and Freshfields. Kathy has worked on some of the largest restructuring cases in the last decade, including Worldcom, Parmalat, Enron and Eurotunnel.