Changes to the Insolvency Rules
The 6 April 2017 saw the introduction of new rules which bring in significant changes to the way in which insolvency processes are conducted.
The last major rewrite of the insolvency rules was in 1986. The business landscape has changed considerably in the last 30 years, particularly in the way in which business communication is conducted and the new rules aim to address this as well as giving creditors of insolvent entities a choice in the degree of engagement they wish to have in the process.
The changes aim to consolidate existing legislation as well as bring in standardisation and the use of more modern language including gender neutral terminology. The new rules also aim to give effect to policy changes resulting from deregulatory initiatives to cut red tape and reduce the costs of administering insolvency processes.
The changes being brought in will allow more widespread use of electronic communication and websites to make it easier for creditors to access information and to communicate with the Insolvency Practitioner (IP).
Instead of creditors’ meetings being convened as a decision making process in a case, new decision procedures will be adopted including a method of deemed consent where appropriate except where a specified proportion of creditors disagree. The new procedures also anticipate the use of virtual meetings and electronic voting.
Creditors will be able to choose to opt out of correspondence, except where that relates to payment of dividends, and the IP has the option to allow creditors with claims under £1,000 to claim without having to prove their debts.
There will also be restrictions on the filing of personal information for employees and consumer creditors to avoid that information being in the public domain.
Overall the new rules are designed to modernise insolvency processes, making them more user friendly for all stakeholders as well as cutting some of the red tape and using simpler language.The rewrite also aims to future proof the rules as far as possible which may reduce the need for future amendments. It is hoped that the streamlined process will result in reduced costs and better returns for creditors.
See our Technical Bite for a brief summary on what creditors need to know about the new procedures.
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