The government has announced an independent review into pre-pack administrations during a parliamentary debate on pre-packs. The timescale will be announced when the review is launched in late spring, reports Chartered Accountants Northampton Harris & Co.
The review will report on the adequacy of existing requirements in relation to transparency of arrangements; compliance with existing requirements by pre-packs including Statements of Insolvency Practice (SIP); effectiveness of existing enforcement mechanisms on compliance; and rules relating to the continuation of supply to businesses on insolvency.
Lord Younger announced plans for the review into pre-packs in the House of Lords on Tuesday [13 March]. He said: ‘An independent review into the issue would be beneficial. For that reason, I confirm that we will commission an independent review into pre-pack sales in late spring, once the strengthened SIP 16 is in place and after the Insolvency Service has reported on the findings from its monitoring.
‘On the review issue surrounding continuation of supply to insolvent businesses, this is now the subject of a government amendment being debated shortly. We propose to consult on the issue prior to implementing reforms and I am satisfied that this will address the concerns in this area.’
In a statement, the Insolvency Service said: ‘The government has listened carefully to the concerns of creditors about pre-packs and that is why we already have measures in place to increase transparency and prevent abuse. Strengthened measures are being introduced to improve the quality of information insolvency practitioners are required to provide on pre-pack deals and we are using targeted monitoring of outcomes to assess whether there is evidence of abuse.
‘Used appropriately, pre-packs can be a highly effective process to ensure the best deal for creditors by better enabling the rescue of businesses, preserving value and safeguarding jobs. The independent review announced by the Minister will enable further evidence to be assembled on how pre-packs are working in practice and whether further steps are needed.’
The independent review has to be completed within 12 months.