On 6th April 2017, new insolvency rules will come into force and replace the Insolvency Rules 1986. It is hoped that the changes which comprise 448 pages will both consolidate and generally streamline insolvency procedures.
Here are some of the key changes brought in by the new rules.
In order to reflect modern business practices and to help the environment, various changes have been brought in through the new Rules, Small Business Enterprise and Employment Act 2015 and Deregulation Act 2015:
- Removing the requirement to hold physical meetings of creditors
- Enabling electronic communication with creditors
- Enabling creditors to opt out of further correspondence
Under the old regime, it was a requirement to convene a meeting of creditors. However, no meetings of creditors will be convened unless requested by:
- 10% of creditors in value, or
- 10% of creditors in number, or
- 10 creditors
Historically holding meetings of creditors was both time consuming and costly and in most instances, rarely attended by creditors. It is therefore anticipated that costs savings will in time enhance distributions to creditors.
Going forward, Insolvency Practitioners (“IP”) will present via letter, their proposals on how they will deal with the case and to provide an objective overview of both the history and financial affairs of the company as well as a report and statement of affairs. Creditors will be deemed to have accepted the proposals unless the convening IP receives objections from at least 10% (by value) of creditors.
The basis of the Insolvency Practitioner’s remuneration will be dealt with following their appointment, via a newly defined decision making process which will include the option of electronic voting.
The rules provide for both virtual meetings and electronic voting systems with the aim of encouraging more involvement from creditors.
One of the new provisions enables officeholders to treat debts of less than £1,000 as proved thus alleviating the creditor from having to provide substantive documentation.
In light of these changes it is more important than ever that if any of your clients obtain information suggesting one of their customers is to enter into a mode of insolvency, that you contact us so that we can make enquiries on behalf of your client to determine whether or not meetings of creditors are appropriate therefore giving your client the opportunity to question both the director and proposed Insolvency Practitioner.
This office provides creditor representation at any meeting throughout the country at no cost. Further details are available by clicking on this link, which you may wish to forward to your clients.
This is a brief overview and if you wish to speak to us in more detail about both the changes and how this will impact on potential clients who are facing insolvency issues or clients who may have claims in insolvency matters, then please do not hesitate to contact one of the team.