Changes to three Statements of Insolvency Practice (SIPs) from 1 April 2021
Steven Wood provides an overview of some of the key changes being made to three Statements of Insolvency Practice (SIPs). The changes will take effect from 1 April 2021.
Following a Joint Insolvency Committee (JIC) consultation, changes are being made to three Statements of Insolvency Practice (SIPs). The changes will take effect from 1 April 2021.
The updated SIPs are:
- SIP 3.2 - Company Voluntary Arrangements
- SIP 7 - Presentation of financial information in insolvency proceedings
- SIP 9 - Payments to insolvency office holders and their associates from an estate (Scotland)
- SIP 9 - Payments to insolvency office holders and their associates from an estate (England)
- SIP 9 - Payments to insolvency office holders and their associates from an estate (Northern Ireland)
A brief overview of some of the key changes is provided below but IPs should take care to familiarise themselves with the new SIPs prior to their effective date of commencement.
To assist IPs and their staff, ICAS will be running an online update session on 24 February at 10.30 am to take a look at the changes in more detail. Register for the update session here.
Background information relating to the changes to the SIPs was set out when the SIPs were issued for consultation in May 2020.
SIP 3.2 - COMPANY VOLUNTARY ARRANGEMENTS
The principal changes made to SIP 3.2 relate to transparency and the provision of information. In particular, additions have been made to the section of the SIP which deals with the proposal. Other changes include an emphasis on the need for the nominee to be objective.
Following the consultation, an additional principle has been included, restating and giving added emphasis to the need for objectivity previously highlighted in the introduction. Clarification has also been given that the requirement to meet face to face with directors where the CVA is to be proposed by directors can be met using technology as well as physical meeting. A number of other more minor amendments have been made.
The same version of SIP 3.2 applies in England and Wales, Scotland and Northern Ireland.
SIP 9 - PAYMENTS TO INSOLVENCY OFFICE HOLDERS AND THEIR ASSOCIATES
Following the consultation, a number of changes will take effect, the principal ones are noted below:
- Conditions relating to the authorisation of disbursements have been extended to cover all expenses, irrespective of whether they are paid firstly by the office holder or their firm or direct from the estate. The principle for requiring authorisation prior to payment now applies to Category 1 and Category 2 expenses, the categorisation depending on who the service to the estate is provided by rather than the mechanism by which they receive payment.
- Clarification that overheads cannot be recovered from an estate (other than when absorbed within charge out rates).
- An expansion of the term “associate” beyond the statutory definition bringing into alignment with the Code of Ethics consideration of personal and business relationships.
- Clarification that SIP 9 does not apply to appointments as monitor under the new moratorium process introduced under the Corporate Insolvency and Governance Act 2020 or members voluntary liquidation (MVLs) unless those paying the fees require such disclosures.
- Where work is to be sub-contracted, information to creditors should include detail of what work is being undertaken and the cost of the work as well as why the work is being sub-contracted.
Legislative differences across the jurisdictions mean that there are separate versions of SIP 9 for England and Wales, Scotland and Northern Ireland. However, the principles remain consistent in all versions.
SIP 7 - PRESENTATION OF FINANCIAL INFORMATION IN INSOLVENCY PROCEEDINGS
Some minor amendments have been made to SIP 7 but the changes made are primarily to align the language used in SIP 7 with SIP 9.
The same version of SIP 7 applies in England and Wales, Scotland and Northern Ireland.
Register to join the experts at ICAS on 24 February at 10.30 am as they explain the changes to a number of Statements of Insolvency Practice which take effect on 1 April 2021.