On 6 April 2017, the Insolvency (England and Wales) Rules 2016 will hit the UK, in their biggest reform in more than 30 years. Aimed at consolidating current insolvency procedures, this will be the first simplified and modernised take on the current rules, which have been amended 28 times since coming into force in 1986.
The rules also take into account changes made to insolvency procedures by the Small Business, Enterprise and Employment Act and the Deregulation Act 2015, removing a lot of the current ‘red tape’ with the use of emails as opposed to paper forms and doing away with physical meetings, thus streamlining the insolvency process and reflecting modern business practice.
Out with the old, in with the new
The new insolvency rules will replace the old in their entirety and have been completely restructured. However, for those of you like me, who have been doing this for some time…don’t worry! The new rules come with a guide that lets you track the old rules to their new equivalent. The Insolvency Service will also be publishing detailed guidance and frequently answered questions via their website.
So What are the Key Changes?
- Use of email and website document portals – Insolvency practitioners will be able to use electronic communication when contacting creditors, rather than paper communication.
- Websites – Insolvency practitioners will no longer need a court order to publish future documents relating to the insolvency via a website. They will be able to send a notice at the outset informing creditors that future documents will be made available online. (There are some exceptions to this, however).
- Physical creditor meetings – will no longer be a requirement for decision making, except in certain circumstances and at the creditors’ request.
- Opting out – creditors will be able to opt out of communications regarding the case (excluding communication relating to a dividend), and are also able to opt back in at any time.
- Statutory forms – the new rules remove all reference to statutory forms previously included in the 1986 rules, replacing them with individual rules that set out the content requirements of prescribed notices and documents.
- Dividends on small debts – Where a dividend is less than £1,000, insolvency practitioners will be able to pay creditors without them having to submit a proof of debt, although creditors will need to prove debt to be involved in the decision making process.
- Appointment of Official Receiver as trustee in bankruptcy upon the making of an order, rather than being appointed as receiver and manager pending appointment of a trustee. This will remove the delay between the making of the bankruptcy order and the automatic vesting of property in a trustee.
Such big changes will require considerable preparation by those in the insolvency industry to ensure the changes are implemented successfully in April. Insolvency practitioners will need to familiarise themselves with these new rules, and how they work, including a review of their current working practices to ensure technology and procedures will be compatible and comply with the new regulations.
For more information on the changes to the rules or for advice in relation to any other general corporate insolvency matters please contact our corporate recovery team on 0845 287 0939 or submit your enquiry online.
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