The guidance which insolvency practitioners must follow when involved with pre-pack sales in an administration are set out in the Statement of Insolvency Practice (SIP) 16.
From 1 November 2013, this guidance will be updated and a copy of the new guidance can be found using the following link: Insolvency practitioners regulation and guidance.
The changes to the guidance includes the requirement for a detailed narrative statement and justification of the sale being included in the initial correspondence to creditors and within seven days of the sale.
Further to this, the administrator also needs to provide the following information to creditors:
- Details of previous sales of the business by an insolvency practitioner in the previous 24 months (or longer if the administrator deems it relevant to the creditors understanding of the business. The administrator is required to disclose details of such a transaction and whether the administrator, the administrator’s firm or associates were involved.
- More complete information regarding valuations obtained is also required. This information now includes the name and qualifications of any valuers/agents, the rationale for the basis of the valuations obtained and an explanation of the sale of the assets compared to those valuations.
The key aim of SIP 16 remains to ensure that in any pre-pack transaction the creditors are aware of all relevant facts.