The New Insolvency Rules – Are You Ready?

by Charanjit  Uppal

The Insolvency Rules 2016 (“the 2016 Rules”) were published and laid before parliament on 25 October 2016. The rules will come in to force on 6 April 2017.  This will see the biggest change in the insolvency regime since 1986. Here I summarise what I think are the big 5 changes:

Decision making by creditors

Sections 122 and 123 of the Small Business Enterprise and Employment Act 2015 (“SBEE”), will amend the 1986 Act by inserting new sections 246ZE to 246ZG and 379ZA to 376ZC. Traditionally decisions were taken at creditor meetings and this has proven both costly and time consuming with attendance at such meetings being poor. These sections together with Part 15 of the 2016 Rules flesh out an entirely new decision making regime for creditors as well as contributories.

  • Deemed Consent. Section 246ZF and 379ZB of the 1986 Act provide that where an officeholder writes to the creditors with a proposal, and does not receive objections from 10% of creditors in value, the proposal is deemed to be approved.
  • Restrictions on use of physical meetings.  Under the new regime we have a significant move away from the physical meetings concept. An Officeholder cannot summon a physical meeting of creditors unless requested by to do so by either 10% of the creditors in value, 10% of the total number of creditors or 10 individual creditors.
  • Alternative Creditors’ Decision Making Procedures.  As an alternative to deemed consent, we also have the following options available for decision making:
    • correspondence;
    • electronic voting;
    • virtual meetings;
    • any other decision making procedure which enables all creditors who are entitled to participate in the making of the decision to participate equally.

In practice therefore there will no longer be a physical s98 meeting and final meetings in liquidation or bankruptcy.

Use of email communications

The 2016 rules will also allow creditors to opt out of receiving communications from officeholders. There is in addition a positive move to email communications. Previously this could only be invoked where the creditor had given written consent to the communication by email. From April 2017 onwards, a creditor who communicates using email is deemed to have consented to receive documents by email.

Use of websites

Officeholders will no longer need the permission of the insolvency court to use websites to communicate with creditors. Officeholders will be able to publish notices on websites that future notices will be published on a website. There are certain exceptions to this but this should streamline much of the case administration work.

Final progress reports

The requirement for a final progress report on conversion of an administration to liquidation under paragraph 83 (which was removed previously) is reintroduced.

Proofs – small debts

Where a debtor’s accounting records or statement of affairs records a small debt due to a creditor (that is a debt where the total sum owed to the creditor is less than £1000), an officeholder may, with a view to limiting the costs of inquiry into that debt, decide to treat that debt as proved for the purpose of payment of a dividend.

Here at BPP, we aim to deliver insolvency training which addresses the new insolvency rules. Our material is fully up to date and delivered by qualified trainers with substantial experience in insolvency. If you want to find out more or have any queries, contact insolvency@bpp.com.

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