New Insolvency Rules: Not A Decade Too Soon

As well as introducing greater simplicity and consistency, the new Rules implement a number of substantive changes to insolvency processes, forms and procedures, many of which aim to more accurately reflect the realities of operating in an often-fast-moving environment in 2017.

The first point of note is that the prescribed forms currently set out in the 1986 Rules will be abolished with effect from 6 April this year. Unusually, rather than substituting updated prescribed forms, the 2017 Rules give a set of individual provisions that, together, set out the standard form and content requirements of various insolvency documents.

As an example of the modernisation process mentioned above, physical creditors’ meetings will no longer be the default method for decision-making in insolvency situations. Instead, the office-holder can obtain a decision through a prescribed “decision procedure” (which include electronic voting and virtual meetings, as well as physical ones if requested by a minimum number or value of creditors) but also, interestingly, through a new process of “deemed consent”. Deemed consent has the effect of turning the process on its head; the office holder notifies creditors of a proposed decision, and this will be deemed approved unless more than 10% by value of creditors object. Deemed consent will not be available in certain circumstances, such as in relation to CVA or IVA proposals, or for office-holder remuneration.

The 2017 Rules also take into account the way in which parties now commonly work and communicate, allowing office-holders to deliver most documents electronically (without the recipient’s prior consent) if the creditor in question has been routinely corresponding in that way. Insolvency documents can also be hosted on a website, provided the office-holder first gives notice that it intends to do so, and physical meetings will no longer be restricted to taking place between 10:00am and 4:00pm.

Of course, the 2017 Rules – in amalgamating over three decades of secondary legislation – cover a vast number of issues not considered in this note. Final creditors’ meetings in insolvent liquidations and bankruptcies will be abolished, small debts of less than £1,000 will no longer need to be proved, and the Official Receiver will now be recognised as trustee in bankruptcy – rather than “receiver and manager” – upon the making of a bankruptcy order. However, it is the modernisation of the insolvency regime generally that will be most welcomed by practitioners, and should lead to reduced costs in an industry where every penny is closely scrutinised.