Changes to Statements of Insolvency Practice 2 and 4
New legislative provisions for the reporting obligations of insolvency office holders on the conduct of those who formerly controlled a company coming into effect from 6 April 2016.
Conduct reports in insolvency procedures which commenced after 6 April 2016 – these will need to be submitted under the new legislation. It must be submitted within 3 months of the office holder’s appointment, via the new online reporting portal.
Conduct reports and returns due in respect of procedures commenced before 6 April 2016 – these will continue to require the submission of a D1 or D2 form. Please see the transitional provisions in the legislation above for full details of the application of the new regime.
It is anticipated the new reporting system will reduce the burden on office holders to supply information and introduce efficiencies in the process. As is currently the case, conduct reports will be based upon information coming to light in the ordinary course of the office holder’s work.
The new process for conduct reporting means that changes have had to be made to SIP 2 (investigations by office holders in administrations and insolvent liquidations) and SIP 4 (disqualification of directors)
Statement of Insolvency Practice SIP 2 (SIP 2)
The extent of the office holder’s investigations is currently set out in SIP 2 - investigations by office holders in administrations and insolvent liquidations. To reflect this and to assist practitioners by reducing the number of SIPs, the Joint Insolvency Committee (JIC) has revised SIP 2 to reflect the new conduct reporting obligations, instead of producing a separate revision of SIP 4.
The revised SIP 2, now renamed, investigations by office holders in administrations and insolvent liquidations and the submission of conduct reports by office holders, has been developed by a JIC working group. The group comprises members of the profession (from firms of different sizes) and creditor representatives. It does not seek to impose additional regulatory burdens upon practitioners. Given the timing of the new legislative provisions, the JIC, in agreement with the recognised professional bodies, concluded it was appropriate to issue the revision of SIP 2 without prior public consultation.
The new SIP 2 will come into effect on 6 April 2016, for cases started after that date. This SIP will apply UK wide.
Statement of Insolvency Practice 4 (SIP 4)
The existing SIP 4 - disqualification of directors, will not be relevant / appropriate for cases to which the new legislative provisions apply. It will continue to apply to cases to which the existing legislation applies.