At a number of times during the procedure, the administrator is required to disclose information to third parties in relation to the work they are completing.
One of these disclosures comes right at the start of the process in the form of the statement of proposals, while another, the Statement of Insolvency Practice (SIP) 16, relates specifically to pre-pack sales.
The Statement of Proposals – Limited Disclosure
Once there has been appointed, they must make a statement that includes details of their proposals i.e. what they intend to do, to achieve the purpose that’s set out. These proposals must be made within eight weeks.
The statement of proposals should include details about the circumstances, details of the administrator’s remuneration and any costs that are charged or incurred.
The proposals must be presented at the initial creditors’ meeting and sent to the registrar of companies, all known creditors and all company shareholders.
However, in some circumstances, the administrator may limit the disclosure of the statement of proposals with the agreement of the court.
They may choose to apply to the court to limit exposure if they believe full disclosure could prejudice the conduct or lead to reprisals against any individual involved.
Statement of Insolvency Practice (SIP) 16
All licensed insolvency practitioners are heavily regulated, and as such they must follow, to the letter, documents known as Statement of Insolvency Practice or SIP.
One such document, SIP 16, was introduced to prevent the potential misuse of pre-pack administrations by requesting a number of disclosures are made to creditors about the details of any pre-pack agreement and sale.
SIP 16 sets out that before organising a pre-pack sale, an insolvency practitioner must undertake sufficient work so that they can disclose the details of the pre-pack to creditors immediately after the pre-pack agreement has been made. The details administrators must disclose, include:
- The extent of their involvement in the pre-pack prior to their appointment;
- Any marketing activities relating to the sale of the company’s assets undertaken by the company;
- Valuations obtained of the business and its underlying assets;
- Alternative courses of action that were explored, with explanations of the financial consequences of each;
- Reasons why the business could not continue to trade and be sold as a going concern;
- The efforts made to consult major creditors before the agreement was made;
- The date of the pre-pack transaction;
- Details of the assets involved in the transaction;
- The consideration for the transaction, the terms of payment and any conditions included in the contract which could affect the transaction;
- A description of the other aspects of the transaction if it is part of a wider sale;
- The identity of the buyer;
- Any connection between the buyer and the directors, shareholders or creditors of the company;
- The names of directors or former directors who are involved in the management or ownership of the purchaser;
- Details of any guarantees given by the company to previous lenders;
- Any options, buy-back clauses or other conditions attached to the sale.
This information should be provided in every case unless there are exceptional circumstances. If there are exceptional circumstances, it should be explained why the information has not been provided.
If you are deciding on putting your business into administration, it’s crucial to seek professional advice in advance. We’re always happy to help, simply give us a call on 08000 746 757 for a no-obligation, free consultation. or chat using the Live Chat box on the bottom right of the screen.