Summary

• Creditors should receive a detailed SIP 16 statement explaining the pre-pack sale, alternatives, marketing, valuations, purchaser, assets, consideration and payment terms.
• Connected purchasers can obtain an evaluator’s qualifying report, while the administrator may instead seek prior creditor approval for the proposed substantial disposal.
• Statutory restrictions cover all or a substantial part of the business or assets sold to connected persons during the administrator’s first eight weeks.
• An unfavourable evaluator opinion does not automatically stop completion, but the administrator must give creditors and Companies House written reasons for proceeding.
• Creditors can ask the administrator for information, use the complaints process or apply to court if the statutory grounds for challenge are met.

The Short Answer

SIP 16 requires an administrator to explain and justify a pre-packaged sale to creditors. In England and Wales, a connected person who proposes to acquire all or a substantial part of the business or assets within the first eight weeks of administration must obtain a qualifying evaluator’s report unless creditors approve the disposal. The administrator must consider the report, disclose specified information and explain any decision to proceed after an unfavourable opinion.

A creditor may learn about a pre-pack only after the administrator has sold the business. The speed can protect trading value, yet it leaves little time for creditors to test the buyer, price or marketing before completion. Concern increases when the buyer is linked to the insolvent company’s directors, shareholders or secured creditors.

Statement of Insolvency Practice 16 (SIP 16) was introduced in January 2009 to require administrators to explain and justify pre-pack sales to creditors. The Graham Review led to further changes in November 2015, including six marketing principles, fuller valuation disclosures, the voluntary Pre-Pack Pool and viability reviews for connected purchasers. Limited use of those voluntary safeguards later led to statutory controls for connected-person sales in 2021.

If you receive a SIP 16 statement, the available disclosures let you examine how the administrator reached the decision and how the consideration compares with independent valuations. A connected purchaser must also address the statutory report or approval route before a qualifying sale. The sections below explain what you should receive, which transactions face extra controls and what you can do if the information raises concerns.

What Must Be Disclosed Under SIP 16?

SIP 16, or Statement of Insolvency Practice number 16, requires a detailed narrative that allows creditors to understand why the administrator used a pre-pack and considered it the best available outcome. The statement should cover the statutory purpose, pre-appointment involvement, alternatives, creditor consultation, funding, charges, marketing, valuations, purchaser connections, assets, consideration, payment terms and any deferred consideration.

The administrator should provide the SIP 16 statement with the first notification to creditors and, in any event, within seven calendar days of the transaction. Any delay requires a reasonable explanation. The statement should also form part of the administrator’s proposals filed at Companies House.

As the Joint Insolvency Committee states in SIP 16: “the level of detail will need to be greater” where the purchaser is connected. For you as a creditor, the connection should lead to fuller disclosure of the sale process and the purchaser’s relationship with the insolvent company.

How Should Marketing Support the Sale?

SIP 16 expects the marketing strategy to expose the business to potential purchasers as widely as its nature, size and available time permit. The statement should explain the media used, marketing period, independence of the exercise and online activity. Any departure from the six marketing essentials requires an explanation of how the alternative produced the best available outcome.

The statement should also identify the valuers or advisers, their qualifications, independence and professional indemnity insurance. Creditors should be told the valuation figures and bases, how the consideration compares with them and, where no valuation was obtained, why the administrator proceeded without one.

The Insolvency Service’s 2024 regulatory review reported that recognised professional bodies received 628 SIP 16 statements during 2024, including 395 connected-person sales. The volume makes consistent disclosure and review particularly relevant to creditor confidence.

When Do Connected-Sale Rules Apply?

The Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021 apply when an administrator proposes a substantial disposal to one or more connected persons during the first eight weeks of administration. A substantial disposal covers all or, in the administrator’s opinion, a substantial part of the company’s business or assets, including a series of transactions.

The statutory test is wider than a conventional pre-pack because the Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021 can apply to a substantial connected disposal negotiated after appointment. A transaction outside the eight-week period still remains subject to insolvency law and the administrator’s duties, although the specific approval or report restriction no longer applies.

Who Obtains the Evaluator’s Report in a Pre-Pack Administration?

The connected purchaser obtains the qualifying report and supplies it to the administrator before completion. The Insolvency Service guidance explains that the administrator must receive and consider a valid report before completing a qualifying disposal without creditor approval. One report can cover several connected purchasers involved in the same substantial disposal.

The evaluator must have sufficient relevant knowledge and experience, appropriate professional indemnity insurance and the independence required by the Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021. The report identifies the property, consideration and connection, records earlier reports, gives an opinion on reasonableness and explains the evidence relied upon.

Regulation 7 of the Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021 requires the evaluator to state whether “the consideration to be provided” and the grounds for the disposal are reasonable. For you, the opinion addresses both the proposed price and the reason for using the connected sale.

Can a Negative Report Stop the Sale?

A case-not-made opinion does not automatically prevent the sale. The administrator may proceed after considering the report, but must send a written statement explaining the decision with the report to creditors and the registrar of companies when the statutory notification requirements apply. The administrator remains responsible for deciding whether the disposal should complete.

A negative opinion therefore creates disclosure and justification requirements rather than a purchaser veto. Creditors can assess the evaluator’s reasons alongside the administrator’s explanation, the valuations, the marketing evidence and the anticipated outcome for each creditor class.

How Does the Pre-Pack Pool Help?

The Pre-Pack Pool provides independent evaluators who can prepare reports for connected purchasers. A purchaser does not have to use the Pool; any evaluator who satisfies the statutory requirements may act. The Pool offers an established application route and allocates matters to experienced business people who assess the submitted evidence.

The Pool’s report does not approve the transaction or replace the administrator’s decision. The evaluator gives the opinion required by the Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021, while the administrator decides whether the sale serves the administration and creditors’ interests.

Can Administrators Disqualify Directors?

An administrator cannot disqualify a director. The office-holder investigates conduct and submits a confidential report to the Insolvency Service, which decides whether further investigation or disqualification action is in the public interest. A court may make a disqualification order, or a director may give a disqualification undertaking without contested proceedings.

The Insolvency Service’s director guidance states that an office-holder must submit a conduct report within three months after formal insolvency begins. Misconduct can lead to disqualification for between two and 15 years. The administrator can also investigate transactions and pursue available estate claims where the evidence and statutory tests support action.

What Can Creditors Do?

You can ask the administrator to explain missing or unclear information and use the firm’s complaints procedure if the response is inadequate. Regulatory complaints can be made through the Insolvency Service Complaints Gateway. A complaint concerns professional conduct; it does not reverse the sale or determine compensation between private parties.

Paragraph 74 of Schedule B1 to the Insolvency Act 1986 allows a creditor or member to apply to court where an administrator has acted, or proposes to act, in a way that unfairly harms the applicant’s interests. Court proceedings carry cost and evidence risks, so obtain advice promptly if you are considering a challenge.

Which Sale Documents May Be Needed?

The documents depend on the assets, contracts, employees and property included in the sale. The principal agreement usually records the assets, consideration, payment mechanics and limited protections given by the administrator. Separate documents may assign intellectual property, transfer title, release security, deal with data, record stock or permit occupation of premises.

A novation may be required where a contract cannot be assigned or where the purchaser must assume both rights and obligations. Lease assignments commonly need landlord consent, so a temporary licence to occupy may support continuity until consent is obtained. Employment information and consultation documents may also be required under TUPE 2006.

Our insolvency practitioners page explains the office-holder’s role, while our administration and liquidation guidance compares the main formal procedures available to a distressed company.

How Can Witan Solicitors Help?

If you are planning or reviewing a connected-person sale, we can advise on the statutory conditions, transaction documents and creditor issues. Our insolvency and corporate recovery team can assess the proposed transaction, explain the risks and coordinate with the appointed insolvency practitioner.

To speak to one of our insolvency law solicitors, please call 0300 303 2071.

FAQs

Does SIP 16 Apply to Every Pre-Pack?

SIP 16 applies to all pre-packaged sales in administrations, regardless of who buys the business or assets. Connected transactions require greater detail. The separate statutory restriction applies only where an administrator makes a substantial disposal to a connected person during the first eight weeks of administration.

When Should Creditors Receive the Statement?

The administrator should provide the SIP 16 statement with the first notification to creditors and no later than seven calendar days after the transaction. If that deadline cannot be met, the administrator should give a reasonable explanation for the delay. The statement should also be included in the proposals filed at Companies House.

Must a Connected Purchaser Use the Pool?

A connected purchaser does not have to use the Pre-Pack Pool. The purchaser may instruct another evaluator who meets the statutory knowledge, experience, insurance and independence requirements. Without a qualifying report, the administrator must obtain creditor approval before making a substantial connected disposal within administration’s first eight weeks.

What Does a Qualifying Report Decide?

A qualifying report gives the evaluator’s opinion on whether the proposed consideration and the grounds for the substantial disposal are reasonable in the circumstances. The evaluator must identify the property, purchaser and connection, state the consideration, address earlier reports, explain the principal reasons and summarise the evidence relied upon.

Can Creditors Overturn a Completed Sale?

A creditor cannot overturn a completed sale merely because the outcome is disappointing. A court challenge requires a recognised legal basis and supporting evidence, such as unfair harm under paragraph 74 of Schedule B1 to the Insolvency Act 1986. Obtain urgent advice because delay, costs and third-party rights can affect the available remedy.

Last reviewed: by Qarrar Somji, September 2026