Statements of Insolvency Practice (SIP) are a set of guidelines issued by the Joint Insolvency Committee (JIC), which is made up of representatives from the Insolvency Service, the Institute of Chartered Accountants in England and Wales (ICAEW), the Insolvency Practitioners Association (IPA), and the Association of Chartered Certified Accountants (ACCA). SIPs provide guidance to insolvency practitioners on best practices for carrying out insolvency procedures.
The upcoming SIP 3.1 update, effective from 1 March 2023, will apply to all individual voluntary arrangements (IVAs) where the nominee is appointed on or after that date. The new SIP 3.1 has been introduced in response to ongoing concerns about the mis-selling of IVAs, particularly in relation to the involvement of debt referral companies in this process. The Insolvency Service has been investigating this issue, and the new SIP 3.1 is one of the measures being introduced to address it.
One of the main focuses of the new SIP 3.1 is the quality, inclusiveness, and appropriateness of pre-appointment insolvency information and advice given to debtors. Insolvency practitioners will be required to carry out due diligence on debt referrers, and check whether they should be authorized by the Financial Conduct Authority (FCA). They will also be required to ensure that any contractual arrangement between the insolvency practitioner and the debt referrer allows them to maintain access to the debt referrer’s communications with the debtor.
The new SIP 3.1 also emphasizes the importance of providing bespoke advice that is tailored to the debtor’s circumstances, rather than relying on generic explanations. This requirement is not limited to IVAs, but applies to all types of insolvency procedure. The ICAEW has warned against over-reliance on checklists and standard documents, and emphasized the need to provide and document bespoke advice that is tailored to the circumstances of the individual or company concerned.
In addition to the changes specific to IVAs, there are also changes in the new SIP 3.1 that could be relevant to all types of insolvency appointment. For example, insolvency practitioners will be required to minimize generic explanations and instead provide detailed and documented explanations that are tailored to the debtor’s circumstances. They will also be required to evidence and document meeting considerations and arrangements, and retain this information on file.
The changes introduced by the new SIP 3.1 highlight the importance of providing high-quality advice to debtors in all types of insolvency procedure. This is particularly important given the potentially life-changing impact that insolvency can have on individuals and companies. The updates to the SIP 3.1 will ensure that insolvency practitioners are held to high standards, and will help to ensure that the advice and information provided to debtors is appropriate, tailored, and helpful. The changes to SIP 3.1 also demonstrate the importance of ongoing review and updating of insolvency guidelines, in response to changing economic conditions and evolving best practices.
To go to the new SIP, click here.