Statement of Insolvency Practice 6 England and Wales DEEMED CONSENT AND DECISION PROCEDURES IN INSOLVENCY PROCEEDINGS INTRODUCTION 1. Insolvency practitioners play a key role in ensuring that persons entitled to participate in the making of decisions are able to make informed decisions and that their participation is properly facilitated. Stakeholder involvement in the making of decisions is essential to the maintenance of trust and confidence in insolvency proceedings. 2. This Statement of Insolvency Practice applies to the use of deemed consent and qualifying decision procedures conducted under the Insolvency Act 1986 (as amended) and applies in England and Wales only. PRINCIPLES 3. An insolvency practitioner should facilitate participation in deemed consent and decision procedures by those stakeholders with an entitlement to participate. 4. An insolvency practitioner should take reasonable steps to ensure that those entitled to participate in deemed consent and decision procedures are treated fairly and able to participate on an informed basis. 5. Requests for additional information should be viewed upon their individual merits and treated by an insolvency practitioner in a fair and reasonable way. The provision of additional information should be proportionate to the circumstances of the case. 6. The formal record of a deemed consent or decision procedure should be an accurate and contemporaneous record, sufficient to explain the business conducted and the basis upon which any discretion was exercised. KEY COMPLIANCE STANDARDS Provisions of General Application 7. Information supplied in connection with a deemed consent or decision procedure should be presented in a manner which is transparent, consistent and useful to prospective participants, whilst being proportionate to the circumstances of the case. 8. An insolvency practitioner should have procedures in place to ensure that any deemed consent or decision procedure used is subject to sufficient and proportionate safeguards against participation by persons who are not properly entitled to participate. 9. When determining the authenticity of a prospective participant s authority to participate in a decision procedure, the insolvency practitioner should exercise their reasonable professional judgement to facilitate the participation of those who appear to be properly entitled. Statement of Insolvency Practice 6 (England & Wales) Page 1 of 3
Provisions of Specific Application - CVL 10. Where an insolvency practitioner is assisting in the obtaining of deemed consent or the convening of a decision procedure, the insolvency practitioner should take reasonable steps to ensure that: a) the convener is made fully aware of their duties and responsibilities; b) that the instructions to the insolvency practitioner to assist are adequately recorded; c) the convener and /or chair is informed that it may be appropriate for them to obtain independent assistance in determining the authenticity of a prospective participant s authority or entitlement to participate and the amount for which they are permitted to do so, in the event these are called into question. 11. An insolvency practitioner should disclose the extent of their (and that of their firm and/or associates) prior involvement with the company or its directors or shareholders, any threats identified to compliance with the fundamental principles of the Insolvency Code of Ethics, and the safeguards applied to mitigate those threats. This disclosure should be made with the notices convening the deemed consent or decision procedure. 12. An insolvency practitioner should seek to ensure that the information available in advance of a deemed consent or decision procedure for the purposes of appointing a liquidator facilitates the making of an informed decision by those that are entitled to participate. Key information likely to be of interest to prospective participants (in addition to that required by statute), will commonly be: a) the date of the instructions to the insolvency practitioner to assist in the deemed consent or decision procedure and by whom those instructions were given; b) disclosure of any amounts paid by or on behalf of the company in respect of those instructions and to whom they were paid; c) a summary of the company s relevant trading activity and financial history, which would typically include (but may not be limited to): i) an explanation of the causes of the company s failure; ii) the name(s) and company number(s) of parent, subsidiary and associated companies; iii) extracts from the company s recent accounts (whether or not filed); iv) an explanation of any material transactions conducted in the preceding 12 months, other than in the ordinary course of business. d) By way of explanation of a statement of the company s affairs: i) a deficiency account reconciling the position shown by the most recent balance sheet to the deficiency in the statement of affairs; ii) the names and professional qualifications of any valuers whose valuations have been relied upon for the purpose of the statement of affairs and a summary of the basis of valuation adopted. Any information should ordinarily be available, on request, not later than the business day prior to the decision date and may be made available via a website. Statement of Insolvency Practice 6 (England & Wales) Page 2 of 3
13. An insolvency practitioner should not accept instructions to assist in a procedure for the purpose of winding up a company unless that practitioner reasonably believes that a liquidator will be appointed. Effective Date: 1 January 2018 Statement of Insolvency Practice 6 (England & Wales) Page 3 of 3
Statement of Insolvency Practice 11 England and Wales THE HANDLING OF FUNDS IN FORMAL INSOLVENCY APPOINTMENTS INTRODUCTION 1. This statement of insolvency practice concerns the handling of funds by insolvency practitioners in connection with their appointment as an office holder. Creditors and other interested parties 1 should be confident that funds are held appropriately and securely and that their interests are adequately protected. 2. Insolvency Practitioners will typically handle the following types of funds: a) Estate money Estate money is all money deriving from the realisation of an asset, income or trading receipt of the insolvent estate received by the office holder in their capacity as such. It is held for the prevailing statutory purposes of the insolvency case. Office holders are at all times responsible for estate money and for any deductions made from the funds so held. b) Client Money Client money is money belonging to a third party that is permitted to be held in accordance with the client money rules and regulations as may from time to time be in force by virtue of the insolvency practitioner s authorisation by a Recognised Professional Body. It may include (but is not limited to) third party money provided other than in consideration for the acquisition of an asset of the estate; funds held by the insolvency practitioner prior to or following their appointment as an office holder; or monies coming into the hands of an insolvency practitioner which are the property of individuals or entities for which they are acting other than in the capacity as office holder. c) Money belonging to the office holder or an entity in which they are working. PRINCIPLES 3. An insolvency practitioner should clearly differentiate and segregate estate money, client money and the money belonging to the office holder or an entity in which they are working. 4. Estate money and client money must only be handled for their proper purposes, held securely and be subject to appropriate financial controls. Estate money must be held in accordance with the principles and standards of this SIP. KEY COMPLIANCE STANDARDS Records 5. Office holders should ensure that records are maintained to identify estate money (including any interest earned thereon) for each case for which they are the office holder and document transactions involving such funds. 1 other interested parties means those parties with rights pursuant to the prevailing insolvency legislation to information about the office holders receipts and payments. This may include the creditors committee, the members (shareholders) of a company, or in personal insolvency, the debtor. Statement of Insolvency Practice 11 (E&W) Page 1 of 2
Account criteria 6. Subject to the rules relating to the payment of funds into the Insolvency Services Account, estate money should be held in account(s) which meet the following criteria: a. all funds standing to the credit of an estate is held as estate money and must be readily identifiable to that estate; b. the account provider must not be entitled to combine estate money with any other funds or exercise any right to set off or counterclaim against any individual estate in respect of any money owed to it by any other individual estate, or for any other reason; c. interest payable on estate money must be credited to the estate by which it was earned; d. the account provider must describe estate accounts in its records to make it clear that the funds held do not belong to the office holder or an entity in which they are working. 7. Where an office holder receives estate money in a manner such that it cannot be paid directly into an estate account, such money may be cleared through an account maintained in the name of the office holder or an entity in which they are working. Such accounts should be operated in accordance with the client money rules and regulations as may from time to time be in force by virtue of that office holder s authorisation. Funds paid into such accounts should be paid out to the estate to which they relate as soon as is reasonably practicable. Safeguards 8. Office holders are responsible for safeguarding estate funds from misapplication or misappropriation. Access to estate money should only be afforded to persons in respect of whose actions adequate safeguard arrangements are in place. Those arrangements should include appropriate financial controls and may include insurance. 9. Office holders should ensure that estate money is at all times held subject to appropriate financial controls. These controls may include (but are not limited to): a. ensuring transactional processing is conducted in a timely manner; b. seeking to ensure that solicitors and agents holding estate money account for those funds in a timely manner; c. allowing only appropriate persons within the entity to conduct transactions; d. adequate supervision of personnel with access to funds; e. limiting the size of transactions that can be processed by different grades of staff; f. implementing secure and robust authorisation procedures within the entity; g. regular reconciliation of estate and client accounts; h. periodic risk assessment of transactional processes within the entity; i. requiring joint signatories or joint authentication. 10. Financial controls and safeguards applied should be proportionate to the number of estates being administered, the quantum of funds held (individually and cumulatively), the number of transactions processed and the structure and ownership of the entity. 11. Financial controls and safeguards, including levels of insurance cover, should be fully documented and reviewed by the office holder for their adequacy, as and when appropriate (and at a minimum annually). Effective Date: 1 January 2018 Statement of Insolvency Practice 11 (E&W) Page 2 of 2
Statement of Insolvency Practice 11 Northern Ireland THE HANDLING OF FUNDS IN FORMAL INSOLVENCY APPOINTMENTS INTRODUCTION 1. This statement of insolvency practice concerns the handling of funds by insolvency practitioners in connection with their appointment as an office holder. Creditors and other interested parties 1 should be confident that funds are held appropriately and securely and that their interests are adequately protected. 2. Insolvency Practitioners will typically handle the following types of funds: a) Estate money Estate money is all money deriving from the realisation of an asset, income or trading receipt of the insolvent estate received by the office holder in their capacity as such. It is held for the prevailing statutory purposes of the insolvency case. Office holders are at all times responsible for estate money and for any deductions made from the funds so held. b) Client Money Client money is money belonging to a third party that is permitted to be held in accordance with the client money rules and regulations as may from time to time be in force by virtue of the insolvency practitioner s authorisation by a Recognised Professional Body. It may include (but is not limited to) third party money provided other than in consideration for the acquisition of an asset of the estate; funds held by the insolvency practitioner prior to or following their appointment as an office holder; or monies coming into the hands of an insolvency practitioner which are the property of individuals or entities for which they are acting other than in the capacity as office holder. c) Money belonging to the office holder or an entity in which they are working. PRINCIPLES 3. An insolvency practitioner should clearly differentiate and segregate estate money, client money and the money belonging to the office holder or an entity in which they are working. 4. Estate money and client money must only be handled for their proper purposes, held securely and be subject to appropriate financial controls. Estate money must be held in accordance with the principles and standards of this SIP. KEY COMPLIANCE STANDARDS Records 5. Office holders should ensure that records are maintained to identify estate money (including any interest earned thereon) for each case for which they are the office holder and document transactions involving such funds. 1 other interested parties means those parties with rights pursuant to the prevailing insolvency legislation to information about the office holders receipts and payments. This may include the creditors committee, the members (shareholders) of a company, or in personal insolvency, the debtor. Statement of Insolvency Practice 11 (Northern Ireland) Page 1 of 2
Account criteria 6. Subject to the rules relating to the payment of funds into the Insolvency Services Account, estate money should be held in account(s) which meet the following criteria: a. all funds standing to the credit of an estate is held as estate money and must be readily identifiable to that estate; b. the account provider must not be entitled to combine estate money with any other funds or exercise any right to set off or counterclaim against any individual estate in respect of any money owed to it by any other individual estate, or for any other reason; c. interest payable on estate money must be credited to the estate by which it was earned; d. the account provider must describe estate accounts in its records to make it clear that the funds held do not belong to the office holder or an entity in which they are working. 7. Where an office holder receives estate money in a manner such that it cannot be paid directly into an estate account, such money may be cleared through an account maintained in the name of the office holder or an entity in which they are working. Such accounts should be operated in accordance with the client money rules and regulations as may from time to time be in force by virtue of that office holder s authorisation. Funds paid into such accounts should be paid out to the estate to which they relate as soon as is reasonably practicable. Safeguards 8. Office holders are responsible for safeguarding estate funds from misapplication or misappropriation. Access to estate money should only be afforded to persons in respect of whose actions adequate safeguard arrangements are in place. Those arrangements should include appropriate financial controls and may include insurance. 9. Office holders should ensure that estate money is at all times held subject to appropriate financial controls. These controls may include (but are not limited to): a. ensuring transactional processing is conducted in a timely manner; b. seeking to ensure that solicitors and agents holding estate money account for those funds in a timely manner; c. allowing only appropriate persons within the entity to conduct transactions; d. adequate supervision of personnel with access to funds; e. limiting the size of transactions that can be processed by different grades of staff; f. implementing secure and robust authorisation procedures within the entity; g. regular reconciliation of estate and client accounts; h. periodic risk assessment of transactional processes within the entity; i. requiring joint signatories or joint authentication. 10. Financial controls and safeguards applied should be proportionate to the number of estates being administered, the quantum of funds held (individually and cumulatively), the number of transactions processed and the structure and ownership of the entity. 11. Financial controls and safeguards, including levels of insurance cover, should be fully documented and reviewed by the office holder for their adequacy, as and when appropriate (and at a minimum annually). Effective Date: 1 January 2018 Statement of Insolvency Practice 11 (Northern Ireland) Page 2 of 2
Statement of Insolvency Practice 11 Scotland THE HANDLING OF FUNDS IN FORMAL INSOLVENCY APPOINTMENTS INTRODUCTION 1. This statement of insolvency practice concerns the handling of funds by insolvency practitioners in connection with their appointment as an office holder. Creditors and other interested parties 1 should be confident that funds are held appropriately and securely and that their interests are adequately protected. 2. Insolvency Practitioners will typically handle the following types of funds: a) Estate money Estate money is all money deriving from the realisation of an asset, income or trading receipt of the insolvent estate received by the office holder in their capacity as such. It is held for the prevailing statutory purposes of the insolvency case. Office holders are at all times responsible for estate money and for any deductions made from the funds so held. b) Client Money Client money is money belonging to a third party that is permitted to be held in accordance with the client money rules and regulations as may from time to time be in force by virtue of the insolvency practitioner s authorisation by a Recognised Professional Body. It may include (but is not limited to) third party money provided other than in consideration for the acquisition of an asset of the estate; funds held by the insolvency practitioner prior to or following their appointment as an office holder; or monies coming into the hands of an insolvency practitioner which are the property of individuals or entities for which they are acting other than in the capacity as office holder. c) Money belonging to the office holder or an entity in which they are working. PRINCIPLES 3. An insolvency practitioner should clearly differentiate and segregate estate money, client money and the money belonging to the office holder or an entity in which they are working. 4. Estate money and client money must only be handled for their proper purposes, held securely and be subject to appropriate financial controls. Estate money must be held in accordance with the principles and standards of this SIP. KEY COMPLIANCE STANDARDS Records 5. Office holders should ensure that records are maintained to identify estate money (including any interest earned thereon) for each case for which they are the office holder and document transactions involving such funds. 1 other interested parties means those parties with rights pursuant to the prevailing insolvency legislation to information about the office holders receipts and payments. This may include the creditors committee, the members (shareholders) of a company, or in personal insolvency, the debtor. Statement of Insolvency Practice 11 (Scotland) Page 1 of 2
Account criteria 6. Subject to the rules relating to the payment of funds into the Insolvency Services Account, estate money should be held in account(s) which meet the following criteria: a. all funds standing to the credit of an estate is held as estate money and must be readily identifiable to that estate; b. the account provider must not be entitled to combine estate money with any other funds or exercise any right to set off or counterclaim against any individual estate in respect of any money owed to it by any other individual estate, or for any other reason; c. interest payable on estate money must be credited to the estate by which it was earned; d. the account provider must describe estate accounts in its records to make it clear that the funds held do not belong to the office holder or an entity in which they are working. 7. Where an office holder receives estate money in a manner such that it cannot be paid directly into an estate account, such money may be cleared through an account maintained in the name of the office holder or an entity in which they are working. Such accounts should be operated in accordance with the client money rules and regulations as may from time to time be in force by virtue of that office holder s authorisation. Funds paid into such accounts should be paid out to the estate to which they relate as soon as is reasonably practicable. Safeguards 8. Office holders are responsible for safeguarding estate funds from misapplication or misappropriation. Access to estate money should only be afforded to persons in respect of whose actions adequate safeguard arrangements are in place. Those arrangements should include appropriate financial controls and may include insurance. 9. Office holders should ensure that estate money is at all times held subject to appropriate financial controls. These controls may include (but are not limited to): a. ensuring transactional processing is conducted in a timely manner; b. seeking to ensure that solicitors and agents holding estate money account for those funds in a timely manner; c. allowing only appropriate persons within the entity to conduct transactions; d. adequate supervision of personnel with access to funds; e. limiting the size of transactions that can be processed by different grades of staff; f. implementing secure and robust authorisation procedures within the entity; g. regular reconciliation of estate and client accounts; h. periodic risk assessment of transactional processes within the entity; i. requiring joint signatories or joint authentication. 10. Financial controls and safeguards applied should be proportionate to the number of estates being administered, the quantum of funds held (individually and cumulatively), the number of transactions processed and the structure and ownership of the entity. 11. Financial controls and safeguards, including levels of insurance cover, should be fully documented and reviewed by the office holder for their adequacy, as and when appropriate (and at a minimum annually). Effective Date: 1 January 2018 Statement of Insolvency Practice 11 (Scotland) Page 2 of 2