You may recently have read about some changes to the Insolvency Rules. We thought it would be useful to give an overview of what these changes mean for corporate insolvencies in England and Wales.
The Insolvency (England and Wales) Rules 2016 came into effect on 6 April 2017. They are the most significant changes for the insolvency profession since the introduction of the Insolvency Act 1986.
What are the main changes?
The main changes include:
- There is no longer a need for a physical creditors’ meeting (although they can be requested by creditors should they wish). Instead of the old ‘Section 98 Meeting’, decisions from creditors will be sought via virtual meetings and correspondence
- Where there are no creditor objections within a specified period, Insolvency Practitioners will be able to deem proposals as having been approved by the creditors
- Electronic communication to and from creditors is to be encouraged wherever possible – including making use of an Insolvency Practitioner’s website / portal
- Creditors are able to opt out of further correspondence – which will suit those who get frustrated by all the reports, especially when there is no prospect of a dividend payment to them
Why were the rules changed?
The main aims of these new rules are to:
- consolidate the rules of the 1986 Act and subsequent amendments into one single piece of legislation
- make it easier for creditors to be involved in the insolvency process
- reflect current business practices
- make the insolvency process more efficient for all parties concerned.
Who are likely to be effected by the changes?
Creditors will benefit from these changes as they should be able to more involved where they want to be (i.e. through on-line meetings and emails) or less involved (i.e. by opting out of the correspondence).
Creditors’ meetings for small companies were rarely attended, so were largely deemed a waste of time for Insolvency Practitioners, creditors and the company directors involved.
Many Insolvency Practitioners (including Clarke Bell) have been holding virtual meetings and making extensive use of electronic communications / client portals for several years already.
It is those that have not been making the best use of technological changes who are likely to struggle to implement these changes. This may end up having a knock-on effect on the level of service they are able to deliver to their clients as they try to update their systems and processes.
If you would like any more information on how these new Insolvency Rules might affect any of your corporate clients, just give us a call on 0161 907 4044 or email firstname.lastname@example.org