The 6th April 2017 sees a new set of insolvency rules coming into force, The Insolvency (England & Wales) Rules 2016. The new rules replace the Insolvency Rules 1986 and their 28 subsequent amendments.
With an estimated 16,502 companies entering insolvency in England and Wales in 2016 (Office of National Statistics) the new rules have been developed to modernise and update the present procedures to make the insolvency process more efficient.
The key changes are as follows:
- Use of email:More freedom and the lifting of certain restrictions and limitations ie. Where a debtor and creditor corresponded electronically pre-insolvency, the insolvency practitioner may continue to correspond with the creditors electronically.
- Use of websites:A court order will no longer be required to publish communications relating to the insolvency on a website.Insolvency practitioners will be able to notify the creditors at the outset that documents will be made available to download from a website.
Changes to creditors’ meetings
The new rules remove the automatic requirement to hold physical creditors’ meetings. The use of virtual meetings, electronic voting etc. are encouraged with the aim of reducing costs and increasing returns to creditors. In the absence of a physical meeting, the insolvency practitioner can notify the creditors of a proposed decision and this is deemed approved unless more than 10% in value of creditors object to the decision.
Abolition of final meetings
Final meetings of creditors will be abolished in bankruptcy and all types of liquidation.
Opting out of correspondence
Creditors are able to opt out of further correspondence and for small dividends to be paid by the office holder without requiring a formal claim from creditors (notices of intended dividend are exclude). Creditors are also able to opt back into correspondence at any time.
Appointment of Official Receiver as trustee in bankruptcy
Upon the making of an order, the official receiver will automatically be appointed as the trustee in bankruptcy. This replaces the official receiver being appointed as the receiver and manager pending appointment of a trustee. This removes the delay between the order and the automatic vesting of property in a trustee.
There are no longer any statutory forms prescribed for insolvency proceedings. The New Rules set out the required content for notices and documents and even goes so far as to specify the order in which the content must appear.
Robin Koolhoven (Head of Insolvency) says: “While the New Rules aim to streamline procedures and communications, as with any change in process, there will undoubtedly be some confusion and perhaps an increase in applications for direction from the Court until everyone in the industry has settled into the new regime. Ultimately, it should make life easier for the insolvency practitioner, but whether creditors will be happy with deeming provisions and potentially less regular contact, remains to be seen.”
To access the full legislation, please click here.
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