You cannot have missed the publicity surrounding the issue of SIP 16 that became required practice on 1 January. We noted that the tone of the press comment was more than a little anti-pre-pack and there has been speculation in this week’s press that further parliamentary scrutiny may result in new controls over pre-packs aimed at addressing creditor concerns about abuse.
For now, the main thrust of our advice is to ensure that any administration is properly justified before you take the appointment and that you take prompt action to seek court approval to terminate the appointment if you cannot achieve the stated purpose.
If you do any administration, assess before you accept the appointment whether it is a pre-pack or even if it is “in the nature of” a pre-pack. If it involves an immediate or early sale to connected parties without full marketing and a period of continued trading, then we recommend that you prepare a file note to justify the approach you are taking and make the full disclosure set out in the new SIP. Note that the requirement is to issue the details on first contact with the creditors, but if that is not possible then disclosure should be made in the proposals.
Note also that the SIP re-iterates the requirement to hold meetings and issue proposals as early as possible. Until now, we have seen regulators take a fairly lenient approach to the timing for issuing proposals and holding meetings, but this SIP could indicate that the regulators intend to take a firmer stance in future, especially with the increased publicity around pre-packs. For now, as we have always done, we recommend that you get the proposals out as soon as you can, with appropriate disclosure and qualification of any estimates or unknowns, and hold the meeting as soon as reasonably practicable thereafter (see also our blog article of Sunday 2 October 2005, which I note, rather worryingly, was filed at 1.27am!!)
