The new insolvency rules – modernised and streamlined
The Insolvency (England & Wales) Rules 2016 came into force on 6 April 2017. The changes represent a major overhaul, being the most significant changes to affect the insolvency profession for three decades. The rules replace the Insolvency Rules 1986 and their 28 subsequent amendments and are aimed at modernising and updating present procedures, making the process more efficient. The changes will affect the estimated 14,000 companies that go through an insolvency procedure each year in England and Wales, and considering each of those companies may have numerous creditors, these changes may prove to be of some consequence.
The main changes include:
Abolition of physical creditor meetings – the vast majority of decisions are currently made only at creditors meetings with the directors and insolvency practitioner present. Holding these meetings incurs costs which are charged to the insolvent estate. However, the creditors will now make decisions by correspondence, electronic voting and virtual meetings, with the use of technology greatly encouraged. All of these measures are designed to assist the insolvency practitioner in choosing the method which will suit the creditors best, making it easier for creditors to get involved and take part in the decision-making process.
Electronic Communication – restrictions and limitations, such as the requirement for consent to be made only via post, have been lifted. The use of email is now encouraged instead, reflecting modern working practices. There has also been a lifting of the need for Court orders and now most information will be made available online, allowing creditors to log in and view and download information at their discretion, rather than having to wait for an official delivery in the post. Furthermore, should creditors who anticipate no repayment due to a lack of assets, they may choose to opt-out of all correspondence and avoid having to read through unwanted progress reports or requests for decisions.
Replacement of prescribed forms – Prescribed statutory forms will be replaced with specified content for notices and documents. This specified content is different from the information previously included in the statutory forms and even goes as far as to specify the order in which the content must appear. 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.
Dividends on small debts – insolvency practitioners will be able to pay dividends to creditors without a creditor having to submit a proof of debt but only where the debt is less than £1,000. This should reduce the administrative burden for insolvency practitioners and creditors alike.
The key aims of these new rules are to increase creditor engagement in the insolvency process, reducing red tape and abolishing physical meetings and paper forms. The streamlined procedures should simplify and speed up the process and an added benefit, save expenses which come from the insolvent estate. It is hoped the rules will better meet the needs of creditors, insolvency practitioners as well as the judiciary.