The new Insolvency Rules 2016 came into force on 6 April 2017. They do three things:
- To consolidate the existing rules and their amendments into a single set of rules
- To modernise and simplify the language
- To incorporate various changes in the law which are intended to reduce the burden of red tape
The ultimate goal is to remove barriers to the efficient administration of insolvency proceedings. This will drive down the cost of administering insolvencies, resulting in improved returns to creditors.
The following are some of the key changes:
- Removal of physical meetings of creditors as the default position in insolvencies: In most cases the office-holder will be able to use a process of deemed consent, where they write to creditors with a proposal, and provided that they receive objections from 10% or less of creditors by value then the proposal will be deemed to be approved. In the event that 10% or more of creditors object to the proposal then the office-holder will use an alternative decision making process.
- Abolition of final meetings: It will still be necessary for the office-holder to engage with creditors by sending them a copy of the final account of the administration, and creditors will continue to be able to object to the release of the office-holder upon receipt of that document by notifying the office-holder of their objection.
- Opting out of further correspondence: This proposal allows creditors to opt out of receiving further correspondence. Notices of intended dividends will not be subject to this provision, and if a creditor has previously opted out of receiving further correspondence then they will still receive such notices if issued by the office-holder. The creditor will be able to opt back in to receiving correspondence at any time.
- Allowing an office-holder to pay a dividend in respect of a debt of less than £1,000 without the need for the creditor to submit a formal claim: Where an office-holder is able to rely on information contained in the company or bankrupt’s statement of affairs or accounting records.
- Official receiver (OR) to be appointed trustee on the making of a bankruptcy order: This measure operates to change the process so that the OR is appointed trustee on the making of the order, unless the court orders otherwise.
- Electronic communication and use of websites: Where email was customarily used before the insolvency, that method of communication can continue post insolvency with the office-holder. In addition to this, the requirement for an office-holder to obtain a court order to put all future correspondence on a case on a website is being removed – the office-holder will only have to send a notice to creditors stating that all future correspondence will be on a website.
- Statement of Affairs: Where a Statement of Affairs is to be filed with the registrar, details of employees, ex-employees, and customers must be contained within a separate schedule, and only a summary will appear in the body of the document. That schedule will be removed before the Statement of Affairs is filed.