Opinion splits over pre-pack transparency reform

Opinion splits over pre-pack transparency reform

Calls for IPs to split the work on pre-pack administrations in two

Are two insolvency practitioners better than one? That is the question facing
the insolvency industry as it looks to stave off continued criticism of its
management of pre-packaged administrations.

Chris Laughton, insolvency practitioner at Mercer & Hole and editor of
R3’s magazine Recovery, has called on the profession to split their pre-pack
roles, so one IP undertakes the pre-appointment work and another takes the
appointment and executes the transaction.

Laughton said: “There is so much concern from creditors on pre-packs that
anything we can do to make it more transparent, more robust and clear of
conflict the better.”

He added that this may not be appropriate for all cases, but believes it can
increase transparency in a system dogged by “perceived conflict”.

Laughton’s clarion call comes as the Office of Fair Trading announced an
investigation into the corporate insolvency market, looking at fee levels and
recovery rates, plus continued criticism of the pre-pack process.

Laughton disputed that having two sets of IPs would increase costs, claiming
that the “additional fees are marginal”, and there was nothing “extra” in the
process to produce higher fees for the business.

But not all in the profession are so keen for a splitting of roles around
corporate insolvency.

Mike Jervis, partner at PricewaterhouseCoopers, said the proposed strategy
could create problems for the incoming IP. “They will have less knowledge of the
business, making it more time-consuming,” he said. Going through the paperwork
of another IP could also slow things down as “different people have different
ways of doing things”.

He added: “One of the big issues in a pre-pack for a business is continuity
for creditors.”

Jervis however believes that a move in this direction is effectively
pointless as SIP16 rules which make IPs report on how they arrange a pre-pack
deal, worked well to “provide a good background for transparency” already.

The Insolvency Service introduced SIP16 in January this year.

IN OUR VIEW

Although SIP16 is a great idea and has helped give pre-packs a better
name it hasn’t tackled the wider issue. Creditors still feel they are being hard
done by in this type of administration, as they are often left in the dark until
the deal has been signed.

Share

Subscribe to get your daily business insights

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata
Professional Services

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

3y

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

3y

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine
Accounting Firms

Turn Accounts Payable into a value-engine

3y

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021
Making Tax Digital

Digital Links: A guide to MTD in 2021

3y

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource