As you may already be aware, the existing Insolvency Rules have been under review for some time as Insolvency was the subject of a government Red Tape Challenge initiative commencing in autumn 2012. It has now been confirmed that the new rules regime will apply to insolvency procedures commencing from April 2017.
The intention is to remove perceived barriers to the efficient administration of insolvency proceedings, reduce unnecessary regulatory burdens and hence drive down the cost of administering insolvencies. There follows a precis of some of the more noteworthy changes. The list is not intended to be exhaustive and seeks to provide only summary information.
Removal of Creditors’ meetings
The most significant change is the removal of meetings of creditors as the default position in insolvencies. Existing provisions for such meetings to take place remotely have been little used in practice so in most cases the office-holder will now be able to use a process of deemed consent. The office holder should write to creditors with a proposal, and provided that objections are received from 10% or less of creditors (by value) then the proposal will be deemed to be approved. Should more than 10% of creditors object to this proposal then the office-holder will then use an alternative decision-making process.
Abolition of final meetings
The requirement for all final meetings of creditors where they occur is to be removed. (creditors’ voluntary liquidation, compulsory liquidation where someone other than the official receiver is liquidator, and bankruptcy where someone other than the official receiver is the trustee). Final meetings for shareholders in members’ voluntary liquidations will also no longer be required.
Opting out of further correspondence
Where creditors form an opinion that they have limited interest in the progress of the insolvency proceedings because it has become clear that there is little or no likelihood of a return to them, creditors may opt out of receiving further correspondence from the office holder.
Office-holder may pay a dividend in respect of a debt of less than £1,000 without the need for the creditor to submit a formal claim
Where an office-holder is able to rely on the information contained in the company or bankrupt’s statement of affairs or accounting records, debts recorded for amounts below the prescribed limit of £1,000 may be treated as proved, without requiring further input from the creditor.
Official receiver will be appointed trustee on the making of a bankruptcy order
This proposal effectively changes the existing process so that the OR is appointed trustee on the making of the order unless the court orders otherwise.
Electronic communication and use of websites
Where email has been customarily used before the insolvency, that method of communication may continue post-insolvency with the office-holder, this being a generally cheaper and speedier medium than traditional post.
Further, where a website is intended to be used to deliver information to a body of creditors, an office-holder will only have to send a notice to them stating that all future correspondence will be on that website.
Victims of violence
The new rules will allow a person considering applying for a DRO, bankruptcy or an IVA to apply to the court for an order that their address is withheld ahead of applying for an insolvency solution.
Payment of dividends
Payment of dividends may be postponed where complicated matters arise in cases that need to be resolved prior to the distribution being made.
Statement of affairs
Statements of Affairs historically contain full details of all creditors, including names, addresses and amounts of their claims. These details will include any (ex-) employees owed money by the insolvent party for wages and also any customers who may have made an advance payment for goods or services. In some corporate proceedings, the Statement of Affairs must be filed at Companies House, meaning those details are placed in the public domain. This has led to concerns over the protection of privacy and identity theft.
The new rules will require that where a Statement of Affairs is to be filed with the registrar, details of employees, ex-employees, and customers must be contained within a separate schedule, and only a summary will appear in the body of the document. That schedule will be removed before the Statement of Affairs is filed. Administration proposals will not contain personal details of those creditors.
Rules on time recording information will be amended to only apply where the remuneration of the nominee or supervisor has been agreed and paid on the basis of the rates agreed and the time spent.
This summary is not comprehensive and is intended only to raise awareness regarding significant forthcoming changes to a variety of insolvency processes. Should you require further information on any of the above matters, or if you require advice on any aspect of insolvency, please contact us.