The New Insolvency Rules

We wrote an article concerning the changes to the Insolvency Rules that came into force in April 2017, with the aim of reducing the burden of red tape and bureaucracy together with modernising and consolidating the existing rules.

The main changes for creditors related to the lack of meetings being undertaken and the introduction of a deemed consent procedure. Any claims under £1,000 were deemed approved for dividend purposes, without the need for a proof of debt to be submitted. Creditors were also encouraged to use email and web communication were encouraged giving them the ability to opt out of certain reporting.

Eighteen months on the feedback has been fairly uniform in terms of the positives and negatives. Creditors have welcomed the reduction in the amount of paperwork they receive, as the administration time tended to outweigh the benefits. They can now choose to monitor those cases that are important to them via online portal systems, safe in the knowledge that any dividend information will still arrive by post.

The removal of the need to submit a proof of debt for claims under £1,000 appears to have saved time and costs for all parties, however the level of claims that fall into this bracket is often small.

For those companies that have frequent and often large debts, many have said that claims under £1,000 have now ceased to be administered at all due to the relative size of any dividend received.

The biggest point of debate regarding the changes is the implementation of the deemed consent procedure. Initially it was viewed positively – why have a meeting when more often than not, creditors do not attend?

Issues have arisen however, when creditors want to engage with the process and have the opportunity to question the director or appoint their choice of IP. This maybe because of the size of the debt or the events leading up to insolvency. One creditor’s claim is rarely sufficient (10%) to request that a meeting is convened, so they must now wait until the full list of creditors is available to try to procure the additional support required.

The concept of virtual meetings, however, has been very well received. They can take place as an alternative to the deemed consent procedure and allow to creditors to vote and engage in a similar way to physical meetings. Travelling time to meetings, together with the costs involved, can often discourage attendance, simply dialling in from home is far easy to do.

On balance the changes seem to have been welcomed the by creditors, as it has given them the opportunity to get more involved with the procedures.

Here at Rogers & Norton, the team are experienced in acting for Insolvency Practitioners, businesses, individuals and directors on non-contentious and contentious insolvency matters especially winding up petitions (presentation and opposing). In particular, we advise directors on the potential liabilities of the director. We also advise on Business Recovery and all forms of Insolvency including Liquidation, Corporate Voluntary Arrangement, Administration and Bankruptcy. Our team assist directors who are the subject of personal guarantees.

For more information contact me at ph@rogers-norton.co.uk or on 01603 675639.