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What changes should insolvency practitioners expect in the revised statement of insolvency practice 9 (SIP 9)? Alison Curry, head of regulatory standards and support at the Insolvency Practitioners Association (IPA), evaluates the new SIP and explains how it emphasises the importance of narrative explanations provided to creditors.
This revision of SIP 9 was necessitated by the Insolvency (Amendment) Rules 2015, SI 2015/443, which requires trustees, liquidators and administrators to provide an estimate of their time costs when approval of any part of their remuneration is sought on a time spent basis.
These new provisions are a result of the findings of the Kempson Report in 2013, which concluded that, where there was insufficient creditor control of fees, then fees tended to be higher. Professor Kempson also noted that reports to creditors were typically formulaic, which discouraged meaningful engagement. In response to these findings, the Insolvency Service consulted in 2014 on proposals to ban time costs completely where there was no secured creditor in control. However, to the collective relief of the profession, these proposals were abandoned in favour of the current provisions that require practitioners to provide fees estimates.
In addition to accommodating these legislative changes, the new SIP 9 provides a significant shift in emphasis towards the importance of the narrative explanations provided to creditors. This largely reflects what creditors have said they wish to receive—less formulaic reporting, with meaningful explanations of:
In keeping with the prevailing theme of transparency, the SIP contains a new provision:
‘Where it is practical to do so, the office holder should provide an indication of the likely return to creditors when seeking approval for the basis of their remuneration’.
This reflects what creditors groups have reported—that this is the key piece of information from their perspective.
Notably, however, the principles of the SIP remain largely unchanged from the 2011 version.
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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.
0330 161 1234