Petition launched for tougher legislation on pre-pack administrations

Credit management and collections company Daniels Silverman has launched an online petition campaigning for statutory force to be given to the Statement of Insolvency Practice (SIP 16) along with penalties for non-compliance, to help prevent abuse of the pre-pack administrations system by companies avoiding debt. Carole Hughes, managing director, Daniels Silverman, says: “There are a […]

Credit management and collections company Daniels Silverman has launched an online petition campaigning for statutory force to be given to the Statement of Insolvency Practice (SIP 16) along with penalties for non-compliance, to help prevent abuse of the pre-pack administrations system by companies avoiding debt.

Carole Hughes, managing director, Daniels Silverman, says:

“There are a growing number of dubious “phoenix” companies that repeatedly fail, costing creditors huge sums of money. We believe tougher legislation is needed to clampdown on those that abuse the system and are urging companies and industry stakeholders to sign our petition.

“While we welcome the government’s proposals for a three day warning to be given to creditors regarding pre-pack sales, this will do little to prevent unscrupulous directors from exploiting the pre-pack system to avoid paying creditors. The government needs to go further and give real force to SIP 16, so it is properly interpreted and complied with.

“Statutory force would enable the Insolvency Service to police the industry and ensure IPs fulfil their duty to consider the interests of creditors.”

Under SIP 16, Insolvency Practitioners are supposed to explain to creditors the full background of their appointment and why they believed the pre-pack was the best way forward. They have to reveal the name of the purchaser and the price paid and a minimum of 17 key pieces of information such as marketing activities, names of rival bidders and valuations received. However, these act as guidance only and the Insolvency Service’s own monitoring of SIP 16 reveals large numbers of cases that were not compliant.

Daniels Silverman is also calling for:

• Tougher scrutiny by the Insolvency Service against potential rogue directors

• A clampdown on Insolvency Practitioners (IPs) marketing pre-packs as a way for directors to avoid their debts

• More stringent rules where directors have been involved in one or more pre-pack administrations.

The petition is live at www.danielssilverman.co.uk/petition.php.