Changes to SIP 13 and SIP 16 and withdrawal of SIP 4
Steven Wood provides a summary of changes being made to two Statements of Insolvency Practice (SIPs). The changes will take effect from 30 April 2021.
The Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021 (“the regulations”) come into force on 30 April 2021.
The regulations impose conditions on substantial disposals in administration to connected persons, namely that an administrator must not proceed with a disposal of property of a company within the first 8 weeks of that company entering administration without either an independent opinion on the disposal, or approval of creditors.
An article looking at the regulations in more detail is available on icas.com.
The legislative changes mean that it has been necessary for the Joint Insolvency Committee (JIC) to make changes to two SIPs. The updated SIPs are:
SIP 16 – Pre-packaged sales in administrations
SIP 13 – Disposal of assets to connected parties in an insolvency process
The changes are being made with the sole purpose of adapting the SIPs to align with the new legislative requirements in the regulations. As a result, the updated SIPS are being issued to come into effect at the same time as the regulations come into force, without the need for consultation.
The JIC has amended SIP 16 to remove references to the pre-pack pool and to replace these with references to the statutory obligation placed on a connected-person purchaser to obtain a qualifying report from an evaluator or creditor approval.
The regulations are not limited to disposals made under a ‘pre-pack’ arrangement but instead to all administrations where a substantial disposal is proposed to connected persons within the first 8 weeks of entering administration. As SIP 13 applies to all connected party transactions, that SIP has also been amended to highlight the additional obligations imposed by the regulations.
The new SIPs will apply to new administration appointments on or after 30 April 2021. IPs should take care to familiarise themselves with the regulations and the new SIPs prior to that date.
Northern Ireland has yet to enact equivalent legislation, though it is expected to adopt similar requirements by 29 June 2021. Until that time, the changes to SIP 16 and SIP 13 will only apply in England, Wales and Scotland.
Statement of Insolvency Practice 4 - disqualification of directors
When new legislative provisions for the reporting obligations of insolvency office holders on the conduct of those who formerly controlled a company came into effect from 6 April 2016, it was intended that SIP 4 - disqualification of directors, would be withdrawn.
However, there remained some ongoing cases where an office holder was able to submit a paper conduct return rather than use the online reporting tool. The Insolvency Service has informed the JIC that all such cases should now be complete.
SIP 4 will therefore be withdrawn with effect from 30 April 2021.
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