ABI makes a stand on pre-pack administrations
The Association of British Insurers (ABI) is calling on the Insolvency Service to improve the transparency of pre-pack administrations.
Pre-pack administrations allow insolvent companies to continue trading while some of their assets are sold to meet secured debts, such as bank loans.
Unsecured creditors can therefore be left out in the cold and the ABI wants more protection for this group.
The Association has have written to the Insolvency Service recommending that its Statement of Insolvency Practice 16 (SIP 16), which regulates the actions of insolvency practitioners acting in a pre-pack administration, is strengthened to ensure compliance.
The body also wants a ban on the same insolvency practitioner acting as adviser to a distressed company both before and immediately after administration.
This should provide a “second pair of eyes” into the pre-pack process to ensure that the proposed arrangements are genuinely in the best interests of all creditors.
In addition, the ABI suggests practitioners should have a duty to return any unsold goods without undue delay.
ABI director of general insurance and health, Nick Starling, says: “Recent developments in the UK insolvency regime have had a disproportionately negative effect on unsecured creditors.”
He adds: “Our main concerns are the complete lack of transparency in pre- pack administrations, and the absence of a voice for unsecured creditors during the insolvency process.”
In January the Insolvency Service said it would prioritise its oversight of pre-pack administrations and examine cases to see if the administrator followed the “spirit” of the rules.
Category: ABI News, Insurance News, Legal News
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