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Costs in pre-packs could increase as a result of government proposals, claim
industry experts.
The warning comes after the recent announcement by business minister Ian Lucas
that a consultation on pre-pack administrations is underway.
The consultation is to look at changing the way pre-packs are conducted and
further scrutinise the transparency report Statement of Insolvency Practice 16
(SIP 16).
Proposals include mandating SIP 16 which is currently voluntary, allowing the
official receiver to investigate directors and administrators actions, and
splitting the IP's role by having one to advise and another to conduct the
pre-pack.
Mike Jervis, partner at PwC, commented: “While we welcome further consultation
on these issues, it is important that regulatory bodies investigate any
insolvency practitioners that are not compliant with SIP16.
"It is also important any changes in the approach do not make insolvency more
costly for creditors.”
He added that the volume of pre-packs had decreased in recent months, perhaps
because IPs are apprehensive about adverse reaction to the deals from the public
and stakeholders.
“Although again this could provide a useful check, it will in reality increase
the costs of the company and potential cost of the administration to the
detriment of unsecured creditors," explained Tim Carter, head of insolvency at
law firm Stevens & Bolton.
He added that the move to separate the role of the IP could encourage "behind
the scene deals" which could be detrimental to the industry.
Carter also has concerns over whether the Official Receiver has the resources to
properly investigate directors and administrator actions.
Source:
RedAlert
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