Proposals to boost confidence in the pre-packaged insolvency process published this week are ‘an expensive recipe for duplicating costs’, a City insolvency lawyer has warned.

The proposals follow a recent report by the Insolvency Service which found that one-third of insolvency practitioners are failing to comply with Statement of Insolvency Practice 16 (SIP16), the code of practice governing the supervision of pre-pack administration.

Proposals put forward by the government include putting SIP16 on a statutory footing with penalties for non-compliance; scrutiny of directors’ and administrators’ actions by the official receiver; disqualifying the person advising on a pre-pack from becoming the administrator; and requiring court or creditor sanction for pre-pack deals involving connected parties.

Mark Andrews, head of restructuring and insolvency at City firm Denton Wilde Sapte, dismissed the proposals as ‘an expensive recipe for duplicating costs’.

He said: ‘Disqualifying the adviser on the pre-pack from becoming the administrator would simply introduce a new person to the case who knew none of the details and would bring nothing to the party without a detailed briefing.’

Andrews said too many insolvency practitioners ticked the boxes rather than complied with the ‘spirit of SIP16’.

Making non-compliance a criminal offence would have a ‘marginal impact’ on the process because non-compliance was already a serious issue, he said. The same applied to scrutiny by the official receiver, although unsecured creditors might feel reassured by the involvement of a trusted public official.

Andrews also doubted whether there were the funds or personnel to ensure court or creditor sanction for pre-pack deals involving connected parties. He said: ‘Court sanction would be a considerable extra expense. And anyway, what is the definition of "connected"? The directors, creditors or purchasers of the company – or all three?’

Business minister Ian Lucas said: ‘It is crucial that business and the public have confidence in the insolvency regime and that pre-packs are being used responsibly and appropriately.’

The pre-pack insolvency process allows struggling businesses to find a buyer before going into administration or liquidation, safeguarding jobs and protecting the value of the company.