Appointing an Independent Evaluator: Everything you need to know

New legislation means that administrators who are selling a phoenix pre-pack to a connected or interested party require independent evaluation.

Malcolm Niekirk tells you everything you need to know and what he has taken from his experience as an independent evaluator so far. He discusses the process of evaluation, answering some FAQs.

Firstly…

Get in touch!

Drop me an email, or give me a call.

I’d like to hear about the plan; what the business is, why a pre-pack is being considered, and what the likely timetable is.  That’s all without obligation.  I’ll tell you what the fee is likely to be.

Next…

When it’s the right time, we’ll agree a fixed fee for my report. 

I’ll send you my engagement letter.  By then you will have engaged the proposed administrator, and you’ll be working with them.

Remember that you will need to allow time for you and the administrator to pass me the information I need.  And I will need time to process it.  It’s best to appoint me early, to avoid delays to the sale.

After that…

Once you’ve engaged me, I will:

1. Send the report template to the administrator.
2. Ask them for the information I need from them.  (It’s all routine; they will have it for any administration of this type.)
3. Send you a copy of the report template too.  That will show you the work I need to do.
4. I will also ask you for some information.  It will mostly be about your plans for the business.  It’s important to show that you are making necessary changes, to avoid repeating the need for an administration.

You must tell me if you have been to another Evaluator.  I have to mention that in my report.

My work…

I will assess the information from you and the administrator and put the assessment in my report.

I will let you and the administrator know, at each stage, what my interim assessment is, so you can anticipate any criticism.

My report will rely mainly on the information from the administrator, particularly their (draft) SIP 16 statement.  That is their own report to the creditors.  In it they will explain:

• How the business has been marketed, to seek the best price for it.
• How it has been valued.
• Why the administration and sale is the right strategy.
• Who it is being sold to.
• What changes you are planning to make, to strengthen the business.
• When important events in the company’s history happened.
• Whether the company was running up more debts, after the planning for administration started.
• Their own role and independence.

I will check that statement to see that it contains all the information that it should, to comply with the administrator’s professional obligations (under SIP 16).

I will also consider how it reads, as a whole, and whether I think it is a clear description and explanation for those affected by the administration.

My conclusion…

As Evaluator, I have to give one of two possible conclusions. They are either:

• That I think the price, and reasons, for the sale are fair.

or

• That I don’t.  (Which is a ‘Case Not Made Opinion’.)

If I have concerns – as I am preparing my report – that I may have to give a ‘Case Not Made Opinion’, I will tell the administrator, and explain why.  That should give you the opportunity to renegotiate the sale to put right the issues that concern me.

FAQs

How long will it take?

I have a template report that I can complete very quickly once I have the information that I need.  I will clearly list the information I need from you and from the administrator.

Please do speak to me about your timetable, and keep me informed if it changes.

I suggest that you should engage me at the earliest opportunity, to minimise the risk of delays.  My experience is that it normally takes longer for the information to get to me, after I have asked for it, than it takes me to process it when I have it.

My experience is also that the information normally comes to me in stages, as it is prepared, rather than all together.

What if it’s a Case Not Made Opinion?

In such a case, the administrator would have to decide whether they can go ahead with the sale, in any event.  Should they decide that they can, they will have to explain why.

You could decide to try again with a different Evaluator, of course.  But my report will have to be disclosed to them, and they will have to refer to it in their own report.

What is SIP 16?

SIP 16 is the short name for Statement of Insolvency Practice number 16.  Insolvency practitioners’ regulatory bodies publish it (and other SIPs) to set out principles of ‘best practice’ that insolvency practitioners should follow.  Although it does not contain legal obligations, insolvency practitioners will follow its requirements as professional obligations.

SIP 16 deals with ‘pre-packaged sales in administrations’ (often called simply ‘pre-packs’).  A pre-pack is a sale that is negotiated between the parties (including the proposed administrator) before the company goes into administration.  It is then implemented as quickly as possible after the administrator is appointed.

SIP 13 (another SIP) deals with ‘disposals of assets to connected parties in insolvency processes’.  In other words, it deals with sales to a new company controlled by people who were involved in the running of the company that’s gone into administration.  Sales like this are often called ‘phoenixes’, named after the mythical bird reborn from its own ashes.

How are you qualified to be an Evaluator?

An Evaluator has to be someone with insolvency experience and qualifications, acceptable to the administrator.  I am a solicitor with some three decades’ experience in insolvency (including time spent in the recoveries department of a bank, and working in insolvency practices).  I have also held qualification as an insolvency practitioner for over 20 years. 

I will present my full credentials to the proposed administrator and re-state them in my report.

My firm carries the appropriate insurance.

I will be disbarred from acting as an Evaluator if I (or anyone else in my firm) has advised you or the proposed administrator on the proposed administration, or the purchase.

Thanks for reading, here's some useful links:

• Our Main Evaluator Page
• About Malcolm
• Our monthly insolvency webinars
• Get In Touch

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