sip 7 e and w presentation of financial information in insolvency proceedings apr 2021

Statement of Insolvency Practice 7: Presentation of Financial Information in Insolvency Proceedings

Introduction

• An office holder must report regularly to creditors and other interested parties.

• Transparency and fairness are of primary importance in dealings by insolvency office holders.

• Definition of "associate": office holders should consider potential associations as perceived by a third party, beyond the legal definition in legislation.

Principles

• Reports should be relevant, clear, informative, consistent, and sufficient for understanding receipts and payments.

• Payments must be fair, reasonable, proportional to the insolvency appointment, and significant expenses should be explained.

• Reporting should assist creditors in exercising their rights under the insolvency legislation.

Key Compliance Standards

Form and General Presentation of Accounts

• Receipts and payments accounts must present figures for both the period under review and cumulatively.

• Information must be concise, potentially in a separate document or note, avoiding redundancy unless required by statute.

• Accounts should categorize items appropriately, enabling comparison with previously estimated figures.

Statement of Funds Held

• Accounts should reconcile with bank balances and any amounts owed to the office holder.

• Disclosure of fund types and accounts is required (e.g., non-interest vs. interest-bearing, investments, etc.).

• Multiple currency accounts must be explained regarding their necessity, impact, and currency value.

Value Added Tax (VAT)

• VAT treatment must be consistent, and implications of treatment should be clarified.

Payments to Insolvency Office Holders and Their Associates

• Required disclosures include:

  • Office holder's remuneration (detailed by amounts paid).

  • Fees related to supervision of trading, pre-appointment costs, and other payments.

  • Payments to associates or firm (disclose amounts, payor relationships, and payment nature).

  • Sub-contractor payments for work typically done by office holder or staff.

Requests for Additional Information

• Requests for further information should be handled fairly and reasonably, proportionate to the appointment's circumstances.

• Creditors may seek further details and can apply to the court if costs seem excessive.

• Information regarding creditor rights should be made accessible through reports.

Other Presentational Matters

Receipts

• Realisations must show gross receipts, with costs displayed separately.

• Sale of charged assets requires separate documentation of net amounts received.

Payments

• Payments should be categorized, indicating those made under duress, to secured/unsecured creditors, and dividends paid.

Trading Under Office Holder’s Control

• A separate trading account is required to provide clarity on operations and costs incurred, with details on:

  • Assets at appointment (e.g., stock).

  • Uncollected debts and unpaid liabilities.

  • Trading assets still to be realised.

Alternative Approaches to Asset Realisation

• Alternative methods for asset realisation must still adhere to the statement's requirements, ensuring creditors understand what was done and the associated costs.

Third Party Funds

• Non-estate funds due to third parties must be disclosed alongside any agreed fees.

Effective Date

• This guidance is effective from 1 April 2021.