UK: Modernised UK Insolvency Rules Arriving April 2017

Last Updated: 3 May 2017
Article by Jonathan Lawrence
  • The updated UK Insolvency Rules 2016 will come into force on 6 April 2017.
  • The new rules have four aims:

    • to reflect modern business practice and increase efficiency;
    • to restructure and modernise the 1986 Rules;
    • to implement policy changes; and
    • to consolidate the 1986 Rules and subsequent amendments.

The Insolvency Rules 2016 (the "2016 Rules") were laid before the UK Parliament on 25 October 2016, and will come into force on 6 April 2017. The Insolvency Rules 1986 (the "1986 Rules") and all amending legislation will be repealed.

There will be significant changes in the way insolvency practitioners conduct insolvency procedures. The structure and layout of the 2016 Rules are very different to the 1986 Rules and they seek to recognise the use of technology and electronic communication in modern business life.

Restructuring

The language used in the 2016 Rules has been modernised and the structure updated to make navigation simpler. To avoid repetition, there is greater use of common parts applicable to multiple insolvency procedures. Since the 1986 Rules were introduced, they have been amended by 28 different statutory instruments. The 2016 Rules consolidate all of these amendments. Where possible, this results in a single regime under the 2016 Rules applicable to all types of procedures.

The table below shows the structure of the 2016 Rules. For example, Part 15 contains all the decision making rules.

Part Number Title of Part
1 Interpretation, Time and Rules about Documents
2 Company Voluntary Arrangements
3 Administration
4 Receivership
5 Members' Voluntary Winding Up
6 Creditors' Voluntary Winding Up
7 Winding Up by the Court
8 Individual Voluntary Arrangements
9 Debt Relief Orders
10 Bankruptcy
11 Bankruptcy Restrictions and Debt Relief Restrictions Orders and Undertakings and Insolvency Registers
12 Court Procedure and Practice
13 Official Receivers
14 Claims by and Distributions to Creditors
15 Decision Making
16 Proxies and Corporate Representation
17 Creditors' and Liquidation Committees
18 Progress Reports and Remuneration
19 Disclaimer
20 Persons at risk of violence and non-disclosure of addresses
21 The EC Regulation
22 Permission to Act as Director etc. of Company with a Prohibited Name

Abolition of statutory forms

The 2016 Rules no longer prescribe any statutory forms. Instead, Part 1 sets out general rules about documents and specific rules set out the exact requirements for particular notices. For example, rule 1.35 sets out the contents of application notices. The required information must be provided in the order listed in the relevant rule or in another order which the author considers would be convenient for the intended recipient.

In practice, it is likely that commercial providers will develop forms that become the market practice. It is expected that Companies House will continue to use prescribed forms for documents that are required to be submitted to the Registrar of Companies and these are currently being updated.

Key changes

The key changes are:

New decision-making procedures Alternative procedures may be used to make decisions in insolvency proceedings. These include correspondence, electronic voting, virtual meetings, physical meetings (subject to the restrictions below), or any other procedure which enables all creditors entitled to participate in the making of the decision to participate equally.
New deemed consent procedure Where an officeholder writes to creditors with a proposal, and fewer than 10% of creditors in value object, the proposal is deemed to be approved.
Emails A creditor who communicated with the debtor by email before the insolvency proceedings commenced will be deemed to have consented to electronic communication by the office holder, unless that consent is revoked. The deemed consent provision will not apply to insolvency proceedings commenced before 6 April 2017.
Use of websites An office holder can give notice to creditors that future notices will be published on a website without further notification to creditors. This previously required court permission. There are certain exceptions: documents for which personal delivery is required, notices of intention to declare a dividend and documents which are not delivered generally.
Progress reports The office holder's obligation to produce progress reports every 6-12 months (depending on the insolvency process) is fixed in relation to the day of appointment, and will not be affected by any change of office holder. A final progress report must be issued on conversion of an administration to a liquidation.
Restrictions on calling creditors' meetings An office holder can no longer call a physical meeting of creditors unless requested to do so by a minimum number of creditors - either 10% of creditors by value, or 10% of creditors by number, or 10 individual creditors.
Removal of requirement for creditors' meetings These provisions will apply to meetings in all insolvency proceedings, including those commencing before 6 April 2017, except certain meetings where notices or reports were issued before that date.

The requirement to hold certain meetings has been abolished. For example, creditor approval of a liquidator in a creditors' voluntary liquidation must be obtained either using the deemed consent procedure or a virtual meeting. Final meetings of creditors in liquidation and bankruptcy are no longer required. Instead the liquidator or trustee must file a final report. The liquidator or trustee's release from liability is subject to creditors' rights to raise an objection within a prescribed period.
Ability to opt out of communications Creditors can opt out of receiving certain communications from office holders. They can also opt back in at any time. Certain documents must continue to be delivered, for example, changes of office holder contact details and notices of distributions.
Address details of consumers and employees Where a statement of affairs that is to be filed at Companies House would otherwise include details of creditors who are consumers or employees, it should simply note the number of such creditors and the total value of their debts.
Payment of small dividends without formal claim An office holder may now treat debts of less than £1,000 as proved without the requirement for the creditor to submit a formal claim, providing that the debtor's accounting records or statement of affairs records the debt.

Conclusion

Given the length of time the existing rules have been in place, the new rules will take some time to assimilate and require ongoing review to assess whether they meet the stated aims of promoting efficiency and increasing returns to creditors.

Further resources

For the full text of the new Rules, please click here.

The UK Insolvency Service has published a table of derivations showing where rules in the 1986 Rules are to be found in the 2016 Rules and also explanatory notes to the 2016 Rules.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.