23 May 2012

BPIF attends Ministerial round table discussion on pre-packs

Following the Government’s announcement that they will not now be proceeding with new regulatory reforms to curb abuse of pre-pack administrations (because of the 3-year moratorium on new regulations for small businesses) the minister can't make any new regulations. A range of views were voiced at the meeting, not least because we were a mixed group of insolvency practitioners and accountants on the one hand, and trade interests and unsecured creditor representatives on the other. If the Minister was looking for a consensus to emerge, he will have been sadly disappointed!

Those of us representing trade interests and unsecured creditors argued the case for reform, while others argued for the status quo. With everyone wanting to have their say, interventions had to be kept short, but we did manage to get through some of our key concerns, such as the need to look at the wider impact of prepacks on competitor companies and the rest of the sector, lack of transparency in handling sales to connected parties, conflicts of interest among insolvency practitioners who both advise a company on business rescue and then handle a subsequent administration, and failure to market openly.

The Minister seemed genuinely interested in trying to take some action to restore public confidence in the pre-pack process, but how fast he will act or far he will go remains unclear. He and his advisors talked at the end of the meeting about possibly increasing monitoring and enforcement of compliance by insolvency practitioners, better publicity for the results of complaints against non-compliance upheld by regulatory bodies and details of any sanctions imposed, increasing the extent to which insolvency practitioners are made to comply with SIP 16 reports in practice, and encouraging creditors and others to report (and provide evidence on) any abuses of the pre-pack regulations by administrators or company directors that they are aware of. BPIF continues to be in the loop on this review and no doubt we shall hear Government intends to do next in due course.