Yesterday
we met one of the developers of the Insolvency Service’s (IS) new CDDA online
reporting system. The first bit of good
news is that the questions used in the trial are not being changed. The IS
intend to wait to see how the system works in practice before making any
changes, and it is unlikely to be until late Summer that they will have
sufficient completed returns to enable them to assess how the questions are
working in practice. Remember that the
ORs will be using the same online reporting system as you. The IS understand that you want stability as
regards the questions, and they will not take changing them lightly. Where they do change them we stressed the
need for a suitable lead-time before the changes come into force to enable you
to change your systems, and also the need for good communication about those
changes.
There
is currently no guidance to assist with the completion of the questions, but
that will change in the future. Most of
the questions are straight forward factual questions, although there are some
questions where you have to express an opinion on a specific matter. These are questions such as, is there
evidence that the director benefited directly or indirectly in an unreasonable or
excessive manner from the company's trading? And, having regard to the size and
nature of the company's trading, are there material deficiencies in the
company's available books and records? We
stressed the need for guidance on those questions in particular, but in the
interim the IS indicated that you should take a common-sense approach when
responding to such questions, considering in particular the position from the
perspective of the case in question. How
does it look to you, as an experienced IP? They appreciate that there is always an
element of subjectivity when responding to such questions, and acknowledge that
whilst there are cases where all IPs would respond in the same way, there are
also cases where different IPs will have different views and so respond
differently.
It
is clear from our discussions that the IS consider that a review of the
company’s books and records and bank statements is fundamental to completing
the online CDDA report. You need to
recover and review those records in order to undertake your initial level of
investigations under SIP 2 in any event.
Given the problems that you can have in getting copy bank statements from
banks, we suggest that you ensure that one of your initial actions on
appointment is to ask the bank for them, and also ask the directors for the
books and records if they have not already been delivered up to you. You also need to ensure that you have systems
in place to chase for them, particularly given that you now only have 3 months
to complete your CDDA reporting obligations.
Chasing for the information will then both protect you from criticism on
a monitoring visit and justify your request for an extension of time to submit
the online CDDA report.
If
you have not managed to obtain copy bank statements and the books and records,
then you will need to apply to the IS for an extension. The IS do not want you to leave it to the last
minute but would rather that extension requests were made say a couple of weeks
prior to the 3 month deadline. As a
practical point, it is generally easier to get the directors to co-operate and
provide records pre-appointment, when they want you to help them out of the
situation. If you only ask for the
records after you have been appointed, you are more likely to face delays.
The
IS are looking at the possibility of sending reminder emails 10 weeks’ after
appointment, but they will, in any event, send you an email as soon as the 3
month deadline has passed. If that does
not elicit a response, then they will be on the phone to you.
The
new CDDA reporting legislation makes it an offence for you not to submit an
online report within 3 months of appointment or to fail to provide additional
information that comes to light. The IS indicated,
however, that they would rather work with you to get you to submit the online
returns on time and to provide the additional information, than punish you for
failing to do so. Linked to that, at
present they have not yet had any discussions with the Regulators as to what
information they will provide to them about late online returns or delays in
providing additional information. We
made the point to them that it would be more likely to encourage IPs to buy
into the new system if they were to provide that information to the regulators
as desk top monitoring information, rather than to make a formal complaint that
would invoke disciplinary procedures. We
are not saying that complaints will not be made at some time in the future, but
you can help yourself by minimising the number of late submissions, and having
a diary prompt say 10 weeks after appointment so that you can then obtain an
extension at that time if you are unable to submit your return on time. Avoid routinely making requests for an
extension and only do so where you are unable to obtain the information to
enable you to complete the return, which other than in exceptional
circumstances should only be if you have not been able to recover and review
the books and records and bank statements.
Finally,
as per my last Blog post, don’t forget to register for the new reporting
regime. You need to register before you
can use it for the first time, and at present only about 250 IPs out of the
1,200 appointment takers have actually registered. You can get to the registration screen by
clicking here.
