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Insolvency

Volume 495: debated on Monday 29 June 2009

To ask the Minister of State, Department for Business, Innovation and Skills pursuant to the answer of 10 June 2009, Official Report, columns 925-26W, on insolvency, whether he has made an estimate of the projected increase in numbers of company administrations in 2009-10, based on the trends identified; and whether he has made an assessment of the merits of making additional funds available to the Insolvency Service to take account of the increase in the number of company administrations owing to the current economic situation. (281830)

[holding answer 23 June 2009]: No official estimates of the number of company administrations in 2009/10 and beyond have been compiled by the Insolvency Service (The Service). This is because company administrations are overseen by private practice insolvency practitioners, and so do not require additional funds from The Service. Administrators have a duty to report to the Secretary of State for Business, Innovation and Skills on the conduct of directors and shadow directors of a company in administration. Where an adverse report has been submitted, The Service may carry out an investigation. The Service has implemented a number of initiatives to assist in the planning and management to deal with increases in the number of adverse reports, including more pro-active targeting and prioritisation of cases.

The Service also monitors compliance by insolvency practitioners with Statement of Insolvency Practice 16 (SIP 16 Pre-packaged sales in administrations), with which all insolvency practitioners are required to comply. Pre-pack administrations are where a sale of the business or assets is arranged before administration and executed by the administrator immediately on or shortly after their appointment. SIP 16 requires insolvency practitioners in pre-pack administrations to explain in detail to creditors the background to their appointment and the reasons for any transaction undertaken through a pre-pack.

An increase in the number of administrations could result in an increase in the number of reports submitted to the Service under SIP 16. This work is part of The Service’s regulatory function. The Service has increased its fees to insolvency practitioners to cover our regulation work in relation to SIP 16s.

The Redundancy Payments Services has also had additional funds available to take into account the increase in the number of overall company insolvencies.

To ask the Minister of State, Department for Business, Innovation and Skills what monitoring of compliance with the Statement of Insolvency Practice 16 on pre-packaged sales in administrations is taking place; and if he will publish the results of such monitoring. (282177)

[holding answer 25 June 2009]: New disclosure requirements aimed at improving the transparency of pre-packaged administrations were introduced on 1 January 2009. The requirements are contained within SIP (Statement of Insolvency Practice) 16, which all insolvency practitioners acting as administrators are required to follow.

The Insolvency Service is thoroughly examining all information received from insolvency practitioners in relation to disclosures made under SIP 16. Any evidence of non-compliance with SIP 16 on the part of insolvency practitioners will be reported to their relevant regulatory body so that disciplinary action may be considered.

In addition, the Insolvency Service is examining the conduct of directors involved in pre-pack administrations and will take into account information disclosed under SIP 16 when considering whether to commence disqualification proceedings against directors.

A report on the Insolvency Service’s monitoring of information disclosed under SIP 16 will be published before the summer recess.