Change to Insolvency Rules
13th Apr 2017
The Insolvency Rules 2016 came into force on 6 April 2017. With an estimated 14,000 companies in England and Wales going through an insolvency procedure each year, and as each of those will usually have a long list of creditors potentially facing bad debts, the impact is not insignificant. Here in Norfolk, we have seen in recent months Matthews and Jaeger going into Administration.
The changes are designed to streamline existing insolvency law and practice. The way that insolvency practitioners engage with creditors will change with ‘old fashioned’ creditors’ meetings likely to become a thing of the past. The changes are most likely to affect. It is anticipated that the new Rules will better meet the needs of creditors, insolvency practitioners as well as the judiciary.
By using more user-friendly, modern terminology it is anticipated that the new Rules will be easier to use and understand. At the same time there will be less ambiguity and consequently less chance of misinterpretation. The new Rules will be structured in a way to reduce repetition. This will be achieved by having common parts applicable to multiple insolvency procedures. Additionally, there is wider use of standard content provisions for notices and provisions.
E-communications are generally faster, cheaper than traditional methods and of course create less of a carbon footprint. The means and methods of communication have moved on significantly since 1986 and to reflect those improvements a number of key changes are contained in the new Rules. These include:
- Use of emails – more freedom to use e-communications and the lifting of certain restrictions and limitations
- Use of web sites – instead of posting communications to creditors they will now be made available by way of downloads from a website (subject to certain exceptions)
- Removal of physical creditors meetings – as the default mechanism for decision-making by creditors. Currently the vast majority of creditors meetings take place with only the director(s) and insolvency practitioner present. Holding creditors’ meetings involves costs and expenses which are charged to the insolvency estate.
In future the office-holder will be able to write to creditors with a proposal which will be deemed to be accepted and approved unless more than 10% (by value) object. If such an objection is registered an alternative decision-making processes will be employed at the discretion of the office-holder. This could include electronic voting, correspondence or a virtual meeting.
The office-holder may only call a physical meeting if specifically requested by at least
- 10% by value of creditors or
- 10% in total number of creditors or
- 10 individual creditors
Peter Hastings Comments “Whilst there are other amendments, the above outlines the main changes covered by the new Insolvency Rules”
Peter also adds that a new form of Statutory Demand must now be completed by creditors.
Here at Rogers & Norton, the team are experienced in acting for Insolvency Practitioners, businesses, individuals and directors on non-contentious and contentious insolvency matters especially winding up petitions (presentation and opposing). In particular, we advise directors on the potential liabilities of the director. We also advise on Business Recovery and all forms of Insolvency including Liquidation, Corporate Voluntary Arrangement, Administration and Bankruptcy. Our team assist directors who are the subject of personal guarantees”.
For more information contact Peter Hastings at email@example.com or 01603 675639.