What are Statements of Insolvency Practice?

Statements of Insolvency Practice (commonly referred to as SIPs) are guidance notes which explain the necessary procedures and compliance standards for insolvency practitioners appointed as office holders of insolvent estates or entities.

What’s changed?

On 6 April 2016 a new version of SIP 2 came into effect.

In particular, SIP 2 has now been renamed: ‘Investigations by office holders in administrations and insolvent liquidations and the submission of conduct reports by office holders’ and  includes provisions relating to the disqualification of directors and office holder conduct reporting requirements. These provisions were previously included in SIP 4 and, as a result, SIP 4 will now be withdrawn on 6 October 2016.

The Joint Insolvency Committee’s rationale for withdrawing SIP 4 this autumn stems from changes to the reporting process brought in by the Insolvent Companies Rules 2016 (the Rules)[1]. The introduction of the Rules means that SIP 4 no longer accurately reflects the reporting duties of office holders appointed on or after 6 April 2016.

It is hoped that the new reporting system will reduce the burden on office holders to provide information and result in a more streamlined and efficient process.

The Rules- a summary

The key feature of the Rules is the introduction of an electronic portal by which office holders must submit certain items to the Secretary of State. The Rules provide that the following must now be sent via the electronic portal:

  • Conduct reports which are required to be produced by office holders under the Company Directors Disqualification Act 1986[2] (the Act).
  • Applications for an extension of time to submit such reports (where the office holder requires more time than permitted under the Act.)
  • Office holder’s reports on conduct of directors as required to be sent to the Secretary of State under section 7A(5) of the Act.

The Secretary of State is required to acknowledge receipt of such items as soon as possible (also through the electronic portal). Should the electronic portal become unavailable for any reason, the Secretary of State must provide office holders with an alternative means of submitting required information.

Failure to comply with the Rules can result in summary conviction and a fine of up to £1000. 

Key changes to note for insolvency practitioners

The key provisions of SIP 2 remain unchanged . However, the principal difference is that SIP 2 now includes an office holder’s duty to report the conduct of an insolvent company’s former director(s) to the Secretary of State. Additionally, the term ‘office holder’ will now, in addition to administrators and liquidators, also include administrative receivers.

Office holders should be aware of the following key points:

  • The changes to SIP 2 will not affect administrations and insolvent liquidations which commenced before 6 April this year.
  • Conduct reports in insolvency procedures which commenced after 6 April 2016 will need to be submitted in accordance with the Rules. Such reports must be submitted within 3 months of the office holder’s appointment, via the new online reporting portal.
  • Conduct reports relating to insolvency proceedings commenced before 6 April 2016 will continue to require the submission of a D1 or D2 form.
  • The new SIP 2 will apply UK wide (some other SIPs apply only to England and Wales).
  • The new SIP 2 does not include detail on the requirements of the Rules – office holders will be required to refer to the legislation directly.

This post was edited by Alex Thompson. For more information, email blogs@gateleyplc.com.

[1] Insolvent Companies (Reports on Conduct of Directors) (England and Wales) Rules 2016 (SI 2016/180) (Report Rules 2016)

[2] section 7A(4)

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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.