The new insolvency rules: what they mean for the insolvency profession
Monday, 16th January 2017
Substantive amendments to the existing insolvency rules come into force in April. Olivia Bridger, of Ashfords, explains the key changes.
The new Insolvency Rules 2016 come into force on 6 April 2017. They aim to reorder and restructure the rules currently contained in the Insolvency Rules 1986, consolidating 23 pieces of amending legislation, and provide a number of substantive amendments to existing insolvency law and practice.
Here are some of the key changes brought in by the new rules.
The new rules remove all reference to statutory forms previously included in the 1986 rules, replacing them with individual rules that set out the content requirements of prescribed notices and documents. The intention behind this is to future-proof the rules, removing the requirement to update forms. In practice, though, this will mean that IPs will have to maintain and update their own forms.
Official Receiver as first trustee
The rules introduce the automatic appointment of the Official Receiver as first trustee immediately upon the making of a bankruptcy order, instead of becoming receiver and manager of bankrupt’s estate pending appointment of a trustee. This will mean there is no longer any delay between the making of the bankruptcy order and the automatic vesting of property in a trustee.
The move away from physical meetings
The new rules shift the focus away from physical meetings, abolishing S.98 meetings and final meetings. Office holders will not summon physical meetings of creditors unless requested by to do so by either 10 per cent of the creditors in value, 10 per cent of the total number of creditors or 10 individual creditors, as brought into the Insolvency Act 1986 by the Small Business, Enterprise and Employment Act 2015.
The rules also introduce a new procedure of deemed consent, where unless an officeholder's proposals are met with objections from 10 per cent of creditors in value, the proposal is deemed to be approved. This will not apply in relation to fixing an office holder's remuneration, or to approve a voluntary arrangement.
There are also other procedures available as an alternative to deemed consent, including correspondence, electronic voting, virtual meetings, physical meetings, or any other procedure that enables all creditors entitled to participate in the making of the decision to participate equally.
The new rules provide further flexibility in relation to contacting creditors by email, where the debtor and creditor communicated by email before insolvency proceedings commenced, they are deemed to have consented to receive documents by email from the IP, as opposed to needing written consent to communicate by email.
The new rules also allow creditors to opt out of receiving correspondence, reducing the amount of unnecessary paperwork being issued by officeholders, with the option to opt back in at any time.
They also allow officeholders to give notice to creditors that future notices will be published on a website without further notification to creditors. There are some exceptions to this, being documents requiring personal delivery, notices of intention to declare a dividend or ‘documents not delivered generally’. A document is delivered generally if it is delivered to some or all of the members, contributories, creditors, or any class of members, contributories or creditors.
There are further new provisions in the rules allowing an office holder to treat small debts (less than £1,000) as proved. Where a debtor’s accounting records or statement of affairs records a small debt due to a creditor, an officeholder may decide to treat that debt as proved for the purpose of payment of a dividend, in order to limit the costs of investigating the debt.
With only a few months before the new rules are introduced, everyone the insolvency profession is going to have to familiarise themselves with their contents to ensure a seamless transition when they are implemented.