Details of consultations on revisions to Statements of Insolvency Practice and insolvency Code of Ethics are published here.
Open consultation: Statement of Insolvency Practice 3.1
The Joint Insolvency Committee (JIC) is consulting on changes to Statement of Insolvency Practice 3.1 - Individual Voluntary Arrangements.
JIC undertook a consultation issued in May 2020 which included revisions to SIP 3.1. At that time these revisions had been identified as being relevant changes as part of a review of SIP 3.2 on Company Voluntary Arrangements. No detailed review of SIP 3.1 was carried out. This consultation builds on the work carried out in 2020 and a draft revised SIP 3.1 is now being consulted on, following a detailed review.
We welcome your views on this consultation which is open from 12 August 2021 until 5 November 2021.
Consultations that have now closed
The Joint Insolvency Committee (JIC) consulted on changes to Statement of Insolvency Practice 3.2 - Company voluntary arrangements, Statement of Insolvency Practice 3.1 - Individual voluntary arrangements, Statement of Insolvency Practice 9 - Payments to insolvency office holders and their associates and Statement of Insolvency Practice 7 - Presentation of financial information in insolvency proceedings.
The consultation commenced on 27 April 2020, closing on 20 July 2020.
Statement of insolvency practice 3.2 - company voluntary arrangements and Statement of insolvency practice 3.1 - individual voluntary arrangements
A working group of the JIC has been reviewing Statement of Insolvency Practice 3.2 - Company Voluntary Arrangements. The working group was comprised of insolvency professionals and other participants in the company voluntary arrangement (CVA) process, including the British Property Federation and HMRC.
The JIC decided to review the SIP because of the raised profile of the CVA particularly in the retail sector, the outcome of the government’s review of the corporate insolvency framework and its focus on company rescue, and the academic research into CVAs carried out by Professor Peter Walton. Professor Walton presented to the working group on his findings.
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.
After completing its review of SIP 3.2, the working group identified potential changes which would also be relevant to Statement of Insolvency Practice 3.1 - Individual Voluntary Arrangements and Statement of Insolvency Practice 3.3 – Trust Deeds. No detailed review of SIP 3.1 and 3.3 was carried out, the relevant changes from SIP 3.2 were simply carried over into SIP 3.1 and 3.3. The JIC is also seeking your views on the proposed changes to SIP 3.1 and there is an opportunity in the consultation questionnaire to suggest other changes to SIP 3.1. SIP 3.3 is not included in this consultation as the recent inquiry into Protected Trust Deeds by the Scottish Government may recommend changes to the law, which could require changes to the SIP or recommend changes to the SIP directly.
The consultation seeks your views on the changes made by the working group. SIP 3.2 applies in England and Wales, Scotland and Northern Ireland, SIP 3.1 applies in England and Wales and Northern Ireland.
Statement of insolvency practice 9 - payments to insolvency office holders and their associates and Statement of insolvency practice 7 - presentation of financial information in insolvency proceedings
In 2019, the Joint Insolvency Committee was asked to review Statement of Insolvency Practice 9, payments to Insolvency Office Holders and their associates, by the Insolvency Service. This was because in its Review of the monitoring and regulation of insolvency practitioners published in September 2018, the Insolvency Service reported that in the volume IVA sector:
There is limited evidence that certain disbursements charged in volume operations are providing real value to either debtors or their creditors and it is not clear whether some are required at all. There is also limited, if any, explanation provided by insolvency practitioners as to why they are fair and reasonable. Some disbursements may instead to be business costs that should not be charged to individual estates or do not provide fair and reasonable value to creditors.
There were also some concerns, raised that SIP9 does not offer sufficient clarity in relation to expenses, including in relation to distinguishing between disbursements and business overhead costs.
A JIC working party was formed and considered the SIP. The working group’s conclusion is that SIP 9 as currently drafted could be refined, in certain specific aspects as follows:
- i). The treatment of “per case fees” charged to the estate as an expense or disbursement.
- ii). Being clear that overheads cannot be recovered from an estate.
- iii). Whether SIP 9 should distinguish between disbursements and other expenses.
- iv). Whether relying on the statutory definition of associates was appropriate.
- v). The treatment of pre-appointment costs.
- vi). Whether the use of lists of examples is helpful or whether such lists are treated as exhaustive; that is if something is not listed as an overhead in a list of examples it is apparently not an overhead and can be charged to an estate.
- vii). Whether SIP 9 should apply to members voluntary liquidation (MVLs). The vast majority, if not all MVL fees, are not paid out of the “estate” but by the parent or some other part of the group, and therefore SIP 9 should not apply. Should the SIP be more explicit about whether or not it applies to MVLs?
A revised version of SIP 9 has been developed which seeks to address the points listed above. The working group is also proposing that the title of the SIP is changed to Payments to insolvency office holders and their associates from an estate.
The working party noted the value of consistency of approach which assists the users of insolvency practitioners’ services and consequently determined that the draft SIP should be issued for consultation with a questionnaire to specifically seek feedback from the users, as well as the regulators, their review teams, the professional compliance teams and Insolvency Service. The consultation questionnaire asks questions about the matters listed above as well as more general questions about the SIP. It is hoped that a constructive approach to the consultation will be taken with parties responding to the consultation questionnaire.
The group also took the opportunity to review SIP 7 - Presentation of financial information in insolvency proceedings. Some minor amendments have been made to the SIP but the changes made are primarily to align the language used in SIP 7 with SIP 9.
The JIC is seeking your views versions of SIP 9 for England and Wales, Scotland and Northern Ireland. Legislative differences across the jurisdictions mean that there needs to be differences in the SIPs, but the principles remain consistent in all the versions of SIP 9. The same version of SIP 7 applies in England and Wales, Scotland and Northern Ireland.
All the changes proposed to the SIPs are in the context of the current legislative framework. SIPs cannot be used as a means of amending the law.
SIP 6 (England and Wales) – decision making
The Joint Insolvency Committee (JIC) consulted on the operation of the interim Statement of Insolvency Practice 6 England & Wales – decision making (SIP 6), which was published on 10 March 2017, effective from 6 April 2017.
The interim Statement of Insolvency Practice 6 superseded and replaced the following Statements, in England and Wales only, from the effective date.
- SIP 8 England & Wales - Summoning and holding meetings of creditors convened pursuant to Section 98 of the Insolvency Act 1986 (SIP 8)
- SIP 10 England & Wales – Proxy Forms (SIP 10)
- SIP 12 England & Wales – Records of meetings in formal insolvency proceedings (SIP 12)
The equivalent SIPs in Scotland and Northern Ireland remain in force.
IPs are aware that legislative changes came into effect on 6 April 2017 with the commencement of the Insolvency (England & Wales) Rules 2016. The consequence of these legislative changes, particularly in relation to the way formal decisions of creditors are obtained, was the Statements of Insolvency Practice listed above (SIPs 8, 10 and 12) were no longer appropriate reflections of expected standards in light of the new legislation, and in some instances would have conflicted with the new law.
The interim SIP 6 was developed by a working party of the Joint Insolvency Committee comprising insolvency practitioners and representatives of HMRC and the Insolvency Service The SIP was approved by the authorising bodies on an interim basis, without the usual public consultation. The decision to do this was taken because of the time constraints of the Rules implementation and the need to ensure that practitioners continued to have an appropriate regulatory framework in which to work, concurrently with the implementation date of the new rules. Therefore, the SIP was issued on an interim basis, with the stated intention that it would be consulted upon, reviewed and amended (if necessary) and thereafter issued in its final form on or around 31 December 2017.
The following approach was used in revising the SIP
- The SIP adopts the principles and key compliance standards format used for all new SIPs;
- The SIP applies to all office holders in all forms of insolvency proceedings, when obtaining a formal decision of the creditors via a deemed consent process or a qualifying decision procedure;
- The SIP additionally applies when assisting directors in their obtaining a decision of the creditors for the voluntary winding up of a company;
- SIP 10 and SIP 12 were largely superseded by specific provisions within the new Rules. To the extent that regulatory provision was considered necessary in addition to the legislative requirements, this was incorporated into the principles and key compliance standards in SIP 6.
- The former SIP 8 required significant amount of information to be provided to the meeting of creditors held under s.98 of the Insolvency Act. Given that, in most instances, there is no longer be a physical meeting of the creditors for this purpose (appointment will usually be by deemed consent or virtual meeting), consideration was given to what information creditors might reasonably expect in order to make an informed decision and when that information ought reasonably to be provided. Consequently, elements of the information previously required by SIP 8 were retained in paragraph 12 of SIP 6, but in a less prescriptive manner. The SIP provides that this information should be available to creditors not later than the business day prior to the decision date, where they request it. This was intended to be a proportionate provision, the operation of which was specifically reviewed in the consultation.
- JIC was interested in feedback as to whether the interim SIP prevents innovative practices in decision making or fails to prevent other inappropriate practice.
The consultation closed on 13 October 2017.
After the consultation closes, the responses received will be reviewed with a view to making any necessary amendments to the interim SIP 6 which, once approved by the authorising bodies, will be issued giving the usual notice period of one month prior to its effective date.
SIP 11 - the handling of funds in formal insolvency appointments
The Joint Insolvency Committee (JIC) consulted on a revised version of Statement of Insolvency Practice 11 - the handling of funds in formal insolvency appointments.
The draft SIP was developed by a JIC working group comprising members of the profession from firms of different sizes with views obtained from creditor representatives including HMRC.
The current SIP 11 dates back to 2007 and is not thought to adequately or fully reflect current practice structures and the banking products used by insolvency practitioners or the practices in which they work. The main change is to provide greater clarity around the need for proportionate safeguards and financial controls, so that creditors and other stakeholders can be confident that funds are held appropriately and securely and that their interests are adequately protected.
In revising SIP 11 the working group took the following approach:
- adopting the principles and key compliance standards format used for all new SIPs;
- futureproofing the SIP by not referring to specific products or media, as these are subject to continual development, instead the characteristics an estate account should possess are described;
- providing a robust and flexible framework in which the need for proportionality is recognised;
- requiring practitioners to review and document the adequacy of their internal arrangements for handling funds.
It is intended that the revised SIP will apply UK wide.
We look forward to hearing from you with your consultation response.
The consultation closed on 12 September 2017.
The Joint Insolvency Committee (JIC) consulted on a revised version of the insolvency Code of Ethics, with the views of insolvency practitioners and other stakeholders.
The consultation closed on 25 July 2017.
Revision of Statement of Insolvency Practice 15 – reporting and providing information on their functions to committees in formal insolvencies and SIP 15 (Scotland) – reporting and providing information on their functions to committees (and commissioners in sequestrations) in formal insolvencies
The Joint Insolvency Committee (JIC) consulted on a revised version of SIP 15.
The consultation closed on 12 September 2016.
The existing versions of SIP 15 date back to 2005 so the consultation draft of the SIP looks quite different from that which is currently in force. The main change is that the draft acknowledges that creditors should be in a position to make an informed decision on whether they wish to seek nomination to a committee. It also recognises that information may be made available to creditors through a variety of mediums.
The revised SIP 15 adopts the following approach:
- adopting the principles and key compliance standards format used for all new SIPs;
- removing all legislative references; and
- future proofing the SIP by disentangling the information guides from the SIP itself.
In conjunction with R3, updated information guides for each of the insolvency processes have been developed and will be published at the same time the new SIP becomes effective.
Revision of Statement of Insolvency Practice 13 – acquisition of assets by connected parties in an insolvency process
The Joint Insolvency Committee (JIC) consulted on a revised version of Statement of Insolvency Practice (SIP) 13 - acquisition of assets by connected parties in an insolvency process.
The consultation closed on 11 May 2016.
The draft SIP 13
The draft SIP 13 has been developed by a JIC working group comprising members of the profession (from firms of different sizes) and creditor representatives.
The current SIP 13 (acquisition of assets of insolvent companies by directors) dates back to 1997, so the draft SIP looks quite different to the current version.
The main change - the new draft acknowledges that creditors and other interested parties want to know about transactions with connected parties generally and not just those involving directors. The proposal is the revised SIP will apply to all connected party transactions in personal and corporate insolvency. There are questions in the response form asking for your views on this approach.
In revising SIP 13, the working group has taken the following approach:
- SIP 13 has been drafted in a proportionate way and without being onerous, recognising that it may apply to low value transactions;
- focused on a narrative explanation of the transaction rather than prescribing the information which should be disclosed;
- adopted the principles and key compliance standards format used for all new SIPs;
- removed all legislative references with the exception of the definition of connected party;
- used (wherever possible) language which is consistent with SIP 16.
The intention is for this SIP to be applied UK wide.
SIP 9 – payments to insolvency office holders and their associates
In July 2013, Professor Elaine Kempson published her Report to the Insolvency Service “Review of Insolvency Practitioner Fees”, which concluded that market controls on insolvency practitioners fees where not always working as intended, particularly where there was no controlling secured creditor. That report was followed by an Insolvency Service Consultation on proposals for “Strengthening the regulatory regime and fee structure for insolvency practitioners”. The outcome of that consultation was to suggest a number of changes to the way in which practitioners are both regulated and remunerated.
On 3rd March 2015 the Insolvency (Amendment) Rules 2015 were laid before Parliament, and will come into effect on 1 October 2015. In summary, these rules provide that insolvency practitioners must provide an estimate of their fees in advance of the approval of the basis of their remuneration in respect of those elements that they propose to take on a time cost basis. The rules also provide for the provision of an estimate of the expenses an insolvency practitioner anticipates that they will incur. The new rules will apply to insolvent liquidation, bankruptcy and administration cases commenced after 1 October 2015.
These legislative changes have necessitated a revision of SIP 9, which does not currently cater for the provision of the estimates that will be required by statute as of October.
Changes to SIP 9
The look and feel of the revised SIP 9 differs significantly from the current version of SIP 9 as the emphasis is placed upon the qualitative value of the information provided to creditors (and other interested parties) rather than the format in which that information is supplied, or suggested to be supplied. This represents a significant departure from previous iterations of the SIP; a departure which is explained in more detail in an Explanatory Note. It is proposed to issue the Explanatory Note concurrently with the SIP to assist practitioners in understanding the new regulatory requirements.
The revised SIP adopts the principles and key compliance standards of all new SIPs and all legislative references have been removed. It is intended that this SIP will apply in England and Wales only, as the new legislation does not currently extend to Scotland or Northern Ireland.
The draft SIP and Explanatory Note have been developed by a JIC working group comprising members of the profession (from firms of different sizes) and creditor representatives.
We look forward to hearing from you with your consultation response.
The consultation closed on 4 September 2015
SIP 16 – prepackaged sales in administrations
In June 2014, Teresa Graham presented the report detailing the findings of her review of pre-packaged administrations to Government. The report included a re-draft of statement of insolvency practice 16 and a recommendation that the Joint Insolvency Committee (JIC) consider the redraft of the SIP. Government accepted all the recommendations in the report.
The JIC reviewed the draft contained in Teresa Graham’s report and produced a revised version of SIP 16 for consultation The JIC’s consultation draft was broadly similar to Ms Graham’s and retained the emphasis on a comply or explain methodology with particular emphasis on the role of marketing and the use of appropriately qualified valuers. The draft also acknowledges the existence of the pre pack pool and preparation of a viability statement by a connected party purchaser.
The JIC sought views on the revised SIP. As the draft contained in Teresa Graham’s report had been in the public domain for more than 6 months and formed part of the recommendations accepted by government, the JIC consulted for a 4 week period and sought views solely on whether it was practical for an insolvency practitioner to comply with the requirements contained in the revised version of the SIP.
The consultation closed on 2 February 2015.
SIP 3 – company voluntary arrangements
In spring 2013, the JIC consulted on a revised version of SIP 3 for individual voluntary arrangements. At that time the JIC announced that steps were being taken to produce separate SIPs for IVAs and CVAs as these are very different processes. JIC has now consulted on a revised SIP 3 for CVAs.
Changes to SIP3
The look and feel of the revised SIP 3 - CVA differs significantly from the current version of SIP 3 but follows the same format as the draft SIP 3 for IVAs.
The SIP focuses on the statutory responsibilities of the insolvency practitioner when acting as nominee or supervisor, but also recognises that an insolvency practitioner may also propose a CVA. If the SIP applies only to CVAs proposed by directors, the relevant paragraphs are identified as 'directors’ proposal'.
The revised SIP adopts the principles and key compliance standards of all new SIPs and all legislative references have been removed. It is intended that this SIP will apply UK wide as there are no jurisdictional issues.
The consultation closed on 7 January 2014.
SIP 3A - trust deeds
Trust Deeds are subject to the common law of Scotland and there is a scarcity of legislation to regulate the product. The insolvency profession has worked closely with the Accountant in Bankruptcy, creditors and other stakeholders in developing changes to the trust deed process. You'll be aware that trust deeds have been the subject of two working parties spanning a period of over 18 months. IPs were represented on the working parties, the aim being to identify and agree changes that the profession should make for a more transparent and better process.
Due to the scarcity of legislation to regulate the trust deed process, the RPBs have concluded in that SIP 3A should remain prescriptive, thereby providing much more detail on what is expected in a trust deed than would normally be provided for in a SIP. This should better serve the interests of creditors and of the debtor.
A copy of the draft SIP has been shared with the Accountant in Bankruptcy and some changes offered by her have been incorporated. SIP 3A is now being issued for a consultation period of four weeks. The consultation closed on 19 April 2013.
SIP 3 (England and Wales) – individual voluntary arrangements
IVAs are now the most common form of statutory solution for personal debt problems and, as it has been some considerable time since SIP 3 was revisited, the JIC decided, in consultation with the regulators and the insolvency profession, to carry out a review of SIP 3.
Changes to SIP3
The drafting of the SIP now recognises that IVAs and CVAs are very different processes, so this revision focuses purely on IVAs. SIP 3 CVA is currently being reviewed by the JIC and it is the committee’s aim that both SIP 3 IVA and SIP 3 CVA will be introduced at the same time. A separate review of SIP 3A – trust deeds - is also being undertaken.
The SIP focuses on the statutory responsibilities of the insolvency practitioner when acting as nominee or supervisor, but also recognises that diverse practices, from sole practitioners to volume providers, may offer IVAs and that the SIP should work for all kinds of insolvency practice.
The revised SIP adopts the principles and key compliance standards of all new SIPs and all legislative references have been removed.
The look and feel of the revised SIP 3 differs significantly from the current version of the SIP. The consultation closed on 14 May 2013.
SIP 16 – pre-packaged sales in administrations
Changes to SIP 16
SIP 16 is being revised to:
- absorb the requirements contained in Dear IP 42 in the SIP and remove the need for insolvency practitioners to follow two documents when completing SIP 16 statements; once the new SIP 16 is in force, the Insolvency Service will withdraw Dear IP 42;
- include additional disclosures identified by the Insolvency Service during their reviews of SIP 16 statements as useful to aiding the understanding of the pre-pack by creditors and others; and
- adopt the format of principles and key compliance standards used in all new and revised SIPs since May 2011.
This revision of the SIP is not a major rewrite and does not seek to impose new requirements on insolvency practitioners. The consultation closed on 14 May 2013. The revised version of SIP 16 is effective from 1 November 2013.
The JIC has also chosen to review SIP 13 - acquisition of assets of insolvent companies by directors - in response to concerns voiced in some quarters about connected party transactions and phoenixism.