Consultation on the operation of interim Statement of Insolvency Practice 6 (E & W) - decision making

The Joint Insolvency Committee (JIC) is consulting on the operation of the interim Statement of Insolvency Practice 6 (England & Wales) – decision making (SIP 6), which was published on 10 March 2017, effective from 6 April 2017.

The interim Statement of Insolvency Practice 6 superseded and replaced SIP 8, SIP 10 and SIP 12, in England and Wales only, from the effective date above. The equivalent SIPs in Scotland and Northern Ireland remain in force.

Background to the consultation

IPs are aware that legislative changes came into effect on 6 April 2017 with the commencement of the Insolvency (England & Wales) Rules 2016. The consequence of these legislative changes, particularly in relation to the way formal decisions of creditors are obtained, was the SIPs listed above (SIPs 8, 10 and 12) were no longer appropriate reflections of expected standards in light of the new legislation, and in some instances would have conflicted with the new law.

The interim SIP 6 was developed by a working party of the JIC comprising insolvency practitioners and representatives of HMRC and the Insolvency Service. The SIP was approved by the authorising bodies on an interim basis, without the usual public consultation. This was due to the time constraints of the Rules implementation and the need to ensure that practitioners continued to have an appropriate regulatory framework in which to work, effective from the implementation date of the new Rules. Therefore, the SIP was issued on an interim basis, with the stated intention that there would be a consultation so that the SIP could be reviewed and amended (if necessary) and subsequently issued in its final form on or around 31 December 2017.

The following approach was used in developing SIP 6:

  • The SIP adopts the principles and key compliance standards format used for all new SIPs.
  • The SIP applies to all office holders in all forms of insolvency proceedings, when obtaining a formal decision of the creditors via a deemed consent process or a qualifying decision procedure.
  • The SIP additionally applies when assisting directors in their obtaining a decision of the creditors for the voluntary winding up of a company.
  • SIP 10 and SIP 12 were largely superseded by specific provisions within the new Rules. To the extent that regulatory provision was considered necessary, in addition to the legislative requirements, this was incorporated into the principles and key compliance standards in SIP 6.
  • The former SIP 8 required significant amount of information to be provided to the meeting of creditors held under s.98 of the Insolvency Act. Given that, in most instances, there is no longer be a physical meeting of the creditors for this purpose (appointment will usually be by deemed consent or virtual meeting), consideration was given to what information creditors might reasonably expect in order to make an informed decision and when that information ought reasonably to be provided. Consequently, elements of the information previously required by SIP 8 were retained in paragraph 12 of SIP 6 , but in a less prescriptive manner. The SIP provides that this information should be available to creditors not later than the business day prior to the decision date, where they request it. This was intended to be a proportionate provision, the operation of which is now being specifically reviewed in the consultation (see question 5 in the questionnaire).
  • JIC is also interested in feedback as to whether the interim SIP prevents innovative practices in decision making or fails to prevent other inappropriate practice. Question 8 in the consultation questionnaire is intended to capture your views on either of these topics.

Letting us know your views 

ICAEW licensed IPs will have already received an email alerting them to the launch of the consultation on SIP 6. You can access the consultation draft of SIP 6 (which is the same version of the SIP that is currently in force) and the forms to submit a response here.

The consultation closes on 13 October 2017.