A new SIP has been released today ready for the commencement of The Insolvency (England & Wales) rules 2016 in just under a month’s time. SIP 6, “Dealing with decision making in insolvency proceedings”, is the replacement for SIPs 8, 10 and 12, and you can read a copy by clicking here. The SIP is an interim version that will be consulted on and then amended as necessary for final release in December 2017.
The emphasis in the SIP is on the provision of information to creditors, both the additional information requested by those entitled to participate in decision procedures, and of more immediate interest to IPs, the information to be provided to creditors ahead of the decision date to appoint a liquidator in a CVL. There is a list of information in the SIP, but it is not as lengthy as the list in SIP 8, nor is it prescriptive. The SIP says that “An insolvency practitioner should seek to ensure that the information available in advance of a deemed consent or decision procedure for the purposes of appointing a liquidator facilitates the making of an informed decision by those that are entitled to participate.” You can provide more, or less, information to creditors than that set out in the SIP, and the approach you take will depend on your assessment of the complexity of the case in question. We would suggest providing the information set out in the SIP in “average” cases, increasing of reducing the amount provided as you see fit depending on whether you consider it to be a simple or more complex case. To help protect yourself from criticism on a monitoring visit you could prepare a file note to justify where you have provided more, or less, information than is set out in the SIP.
This explanatory information about the company’s affairs should be delivered to creditors at the same time as the statement of affairs and, as with the statement of affairs, should be delivered to them by no later than the business day prior to the meeting. We think that the content of the disclosure and the timing for providing it are likely to be significant areas when the SIP is put out for consultation. It seems likely that some creditors will want more information earlier, but as may be reluctant to recognise that there is additional cost in taking such an approach.
Linked to the above, while the concept of the IP being the “advising member” from SIP 8 has not been repeated, the IP “should take reasonable steps to ensure that: a) the convener is made fully aware of their duties and responsibilities; b) that the instructions to the insolvency practitioner to assist are adequately recorded.” That will mean making sure that there is suitable wording in your engagement letter to cover this off.
The SIP also includes a requirement to send notice to all prospective participants in a decision procedure on the same business day. Where you send the notice by 1st class post or by email to all participants that should not be an issue, but where you use a mixture of methods of delivery you will need to ensure that you co-ordinate them. The same requirement will also mean that UK creditors will get more notice than international creditors if you effect delivery by post. UK post is deemed served after 2 days for first class and 4 days for second class, but deemed service of international post is based on the Post Office’s normal international post delivery times.
The SIP also briefly deals with the issue surrounding identification of participants at virtual meetings. In physical meetings you get participants to sign in, and if you have any doubt as to their identity and right to be at the meeting you can check it in person. For virtual meetings that option may not be available. The SIP rather helpfully says “when determining the authenticity of a prospective participant’s authority to participate in a decision procedure, the insolvency practitioner should exercise their reasonable professional judgement to facilitate the participation of those who appear to be properly entitled.” In other words, it is up to you, but if you have suspicions about any of the participants then whatever decision you make about their participation, or lack of it, prepare a contemporaneous file note justifying the reasons for your decision. That should then help protect you against any complaint as long as you have acted reasonably based on the facts available to you.
In respect of the decision procedure to appoint a liquidator in a CVL the SIP recognises that it is the directors who are the conveners of the decision procedure and hence are responsible for checking that participants are entitled to participate and in admitting creditors to vote at the virtual meeting. The SIP requires the IP to inform the chair/convener that “… it may be appropriate for them to obtain independent assistance in determining the authenticity of a prospective participant’s authority or entitlement to participate and the amount for which they are permitted to do so, in the event these are called into question.” As the prospective officeholder, you have a vested interest in the chair/convener deciding in a way that guarantees your appointment. To avoid this ethical threat you should advise them to take legal advice, albeit that you could suggest a lawyer they could use.
As we mentioned at the start of the article, this is an interim version of the SIP and it is to be consulted on. If you have any comments on it, or issues about how it works in practice, remember to participate in the consultation. I am sure that we will be doing so, but the more comments on the SIP the regulators receive from IPs, the better as that provides a counterpoint for comments by creditors
