Government announces independent review of pre-packs, R3 comments
“R3 welcomes the independent review of pre-packs and believes Government can do more to increase the transparency of what is an extremely useful business rescue tool. We recognise the concerns from within the creditor community about the pre-pack process, particularly over connected party sales, and we hope this review will help to increase confidence in the regime and highlight the vital role pre-packs play in saving businesses and jobs.
“R3 have been calling for key changes to the pre-pack process for some time, which we believe will boost transparency and confidence in the process, whilst protecting this important rescue tool.
“To improve transparency, R3 believe that the Insolvency Service should provide Insolvency Practitioners with detailed criteria of what they expect to be included in the SIP 16 report (explaining the pre-pack to creditors) and provide feedback to Insolvency Practitioners where the report has been judged non-compliant, as recommended in the recent Business, Innovation and Skills Select Committee report. The report also recommend that the criteria by which SIP 16 reports are judged should be published alongside the guidance.
“To further address creditor concerns over pre-pack sales to connected parties, R3 also believes that creditors should be granted the option to appoint an independent liquidator. This would enable the sale to be properly assessed and allow for wrongdoing by any party to be tackled. We believe that, taken together, these changes will go some way to improving the confidence of creditors in the pre-pack process.
“Pre-packs fare considerably better than alternatives in terms of the retention of jobs and returns to secured creditors. This is crucial during the current sluggish recovery. If the economy is to deliver sustainable growth it will need entrepreneurship and to give viable businesses a second chance.We must make sure that any changes do not risk crippling this useful and effective process.”
Lee Manning, R3 President