Thursday, June 13, 2013

A step too far?

We have noticed that if you ask for lots of resolutions at a meeting there is a significantly increased chance that you will get something wrong or the creditors’ wishes will be uncertain and we therefore recommend a simple approach where possible.  One example of this is when seeking approval of proposals in administrations, where the interaction between paragraphs 49 and 53 of Schedule B1 and rule 2.33 means that “the proposals” refers to all of the information disclosed under rule 2.33 and you only need a single resolution to approve “the proposals”, with a second to deal with approval of pre-appointment costs if appropriate.  You certainly don’t need to have 10 or more resolutions covering each action you propose and each exit route.
Recently, however, we have seen one of the regulatory monitors suggesting that all fees in an administration should be separately authorised, using SIP 9 as the justification.  We are usually the first to acknowledge any grey areas or imperfections in our legislation or the SIPs, but on this subject we consider that the monitor’s approach is incorrect and adding an additional requirement that is not required under the legislation. 

If this is some interpretation that a particular regulator has adopted, or which has been agreed by all regulators at the Meeting of Monitors or by the Joint Insolvency Committee, we think that it should be properly disclosed to the profession and opened up for discussion since it is changing what has been an accepted approach taken for the last 10 years. It could, however, just be an error. Gareth and I are quite aware from our own past as regulators that one can sometimes get a bit over-zealous in the heat of a visit. We hope that is the case here and that the issue will be quietly laid to rest. If anyone has other examples or obtained written explanations from a regulator about this point, we would be happy to hear of them.