Pre-pack ethics code on the horizon

Insolvency practitioners in the UK will be hit with a code of ethics this weekend, which includes a codification for the first time to ensure the best value is secured by pre-packaged administrations.

Pre-packs are disliked by some creditors because a buyer is lined up before struggling businesses enter administration, raising fears that directors can simply drop debts and repurchase their own companies.

The code has been issued to put their minds at rest that best value is being achieved by IPs using the procedure. ‘[The code of ethics] is going to be issued as planned at the beginning of November,’ said David Kerr, the Insolvency Practitioners Association’s chief executive.

Kerr said that an electronic version of the code book would go online at the weekend before the first in a series of roadshows kicks off on 3 November to help IPs get to grips with it.

‘Statement of insolvency practice 16’ will see IPs make disclosures on topics such as company valuation discussion with creditors.

‘We will publish some supplementary guidance published which will particularly draw out the issue of transparency versus confidentiality,’ Kerr said.

‘There’s a fundamental principle in the code to maintain confidentiality, but with insolvencies that involve pre-packaged administrations, there is also a duty to do all you can to ensure that the creditors have as much information as possible to see that best practice has been followed.’

The body has codified the rules as part of its aim is to promote and maintain standards of performance and professional conduct among those engaged in insolvency practice, but it remained unclear when the code book would officially be rolled out because of the number of stakeholders that had to sign off on it.

‘With eight regulators [who are recognised professional bodies for insolvency specialists], you’re bound to get some differences in emphasis,’ one IP said, backing the code book.

The professional bodies will have until 1 January to phase in the rules.