Credit Management magazine May2017

OPINION
POOL PARTY?
The Pre-pack Pool recently published its Annual Review for 2016.
Stuart Hopewell FCICM, one of the Pool’s Directors, reports on progress to date.
AS previously reported in Credit
Management, The Pre-pack Pool
started taking referrals on 1 November
2015. It issued its first Annual
Review on 31 March 2017 for the period to
31 December 2016 to coincide with that of
The Insolvency Service, hence the 14-month
period.
With an initial roster of 19 (now 18)
reviewers and an Oversight Group consisting
of all the major Recognised Professional
Bodies (RPBs) and other stakeholders,
including the CICM, the Pool was formed in
response to recommendations in the Graham
Report into Pre-packs.
In its first 14 months, it has reviewed
53 applications, with all but six receiving
a positive response (34 ‘positives’ with
no qualification and 13 where a ‘qualified
positive’ was given). Six were rejected as
‘case not made’.
Using data provided by the various
insolvency RPBs (mainly ACCA, ICAEW, IPA
and ICAS), the Pool received referrals from
approximately one in four of all Pre-packs,
a somewhat disappointing ratio. Given the
limited number of referrals then, has the
Pool met the objective of the Graham Report
in reassuring creditors that Pre-packs are
‘reasonable’ and ‘fair’?
As our objective is to give an independent
opinion to ‘interested parties’, we are reliant
on pressure from creditors and suppliers for
directors and owners to make referrals, as the
entire process is voluntary.
CREDITOR ENGAGEMENT
While there is support for the process from
the CICM, feedback to the Pool from creditors
connected to the referred cases indicated that
they either hadn’t heard of it or, if they had,
did not take the time to read an Administrators
report.
The concept of the Pre-pack Pool was to
reassure creditors of the failed company that
the Pre-pack deal was reasonable and give
them confidence to supply the new entity. If
creditors are seen to take little interest in the
process, then directors and their advisors
may see little benefit in going through the
process.
I believe that the Pool has a positive
contribution to make, but only if it’s seen to
be an essential part of the insolvency process
by both creditors and prospective applicants.
Currently referral is voluntary, but the
Government does retain reserve powers to
make it compulsory or ban connected party
sales up until May 2020. I feel this would
be a retrograde step, however, and could
lead to more liquidations and more losses to
creditors.
If most connected party Pre-packs
continue to go ahead without reference to the
Pool and creditors continue to supply, then is
it ‘essential’? Perhaps only time will tell.
I believe that the Pool has a positive
contribution to make, but only if it’s
seen to be an essential part of the
insolvency process by both creditors
and prospective applicants.
Key Facts
53 – the number of referrals made to the Pool
34 – the number of opinions to say the Pre-pack was
not unreasonable
13 – the number of cases where the Pre-pack was not
unreasonable but limited evidence was provided
6 – the number of opinions to say the case for the
Pre-pack had not been made.
30 May 2017 www.cicm.com
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