By Tim Corfield.
New rules come into force from 6th April 2017 which are a major overhaul aimed at updating present insolvency procedures that have been in force since the Insolvency Rules 1986. The purpose behind the changes is to use modern communication systems to streamline the various processes and save expenses being charged to the insolvency estate.
One of the major changes that non-insolvency professionals will come across is the end to automatic physical creditors’ meetings. Such meetings are called at various points of the insolvency process – a common example is under section 98 of the Insolvency Act 1986 a meeting of creditors is called by shareholders to put a company into a formal liquidation process. With most section 98 meetings, these days, only the insolvency practitioner and the director(s) attend. This involves costs and expenses being charged to the insolvency estate.
At the section 98 meeting the “Statement of Affairs” is presented to any creditors that attend. In future, this will now be forwarded in advance.
Under the new rules the Insolvency Practitioner will write to creditors with a proposal which will be deemed to be accepted and approved unless more than 10% (by value) object. If such an objection is received an alternative decision making process will be employed at the discretion of the Insolvency Practitioner. This could include electronic voting, correspondence or a virtual meeting.
The Insolvency Practitioner may only call a physical meeting if specifically requested by at least:
- 10% by value of creditors or
- 10% in total number of creditors or
- 10 individual creditors
The new 2016 rules extend to 448 pages and the explanatory memorandum to seven pages. The above is therefore not intended to be a summary of the new rules but a change to the rules that non-insolvency professionals are likely to come across from April.
Of course, should you, or one of your clients have any specific question – please do not hesitate to call us.
In the meantime life and business goes on. The one thing to be certain of is that things will always change in a business – both internal and external environments. Should any change affect a business adversely it’s vital for the directors to take advice as early as possible – and that’s where we’d also be pleased to assist.
If you have any clients or contacts that have such issues with their business please ask them to get in touch with me or Janet Peacock for a free, confidential chat or meeting – we will be able to help!