Do I need to worry about SIP16 in an Administration?

In short

No. 

Statement of Insolvency Practice 16 (or SIP16) requires an administrator to report to creditors on their actions to ensure that creditors are informed as to the reasons why the licensed insolvency practitioner acting as administrator decided on a pre-packaged sale.  You don’t have to concern yourself about it but your chosen administrator does have to.

In more detail

SIP 16 says that an insolvency practitioner must, before organising a pre-pack, have undertaken such work that he can disclose the following to creditors immediately after the pre-pack agreement has been entered into:

  • Source of the administrator’s initial introduction to the company and extent of the administrator’s involvement prior to appointment
  • Marketing activities in relation the sale of the company’s business conducted by the administrator or company
  • Any valuations obtained of the business or assets
  • Alternative courses of actions considered by the administrator along with explanations of possible financial outcomes
  • Why it was not appropriate to trade the business and offer it for sale as a going concern during the administration
  • Details of requests made to funders to fund working capital
  • Whether efforts were made to consult with major creditors
  • Date of the pre-pack transaction
  • Details of assets and nature of transaction
  • Identity of the purchaser
  • Any connection between the purchaser and directors/shareholders or secured creditors of the company
  • Names of directors or former directors who are involved in the management or ownership of the purchaser
  • Whether directors have given guarantees for amounts due from the company to a prior financier
  • Any buy back arrangements or similar conditions attached to the contract of sale and if it is a sale to a connected party a report from an independent evaluator

So you can see from the above the extent of the disclosure that has to be made by the administrator to creditors as soon as possible after a pre-pack sale is extensive. 

What next?

If you have any concerns or wish to discuss any element of pre-pack administrations give us a call on 0800 254 5494