UK: The Insolvency Rules join the Electronic Age

Introduction

The Insolvency (Scotland) Amendment Rules 2010 came into force on 6 April 2010. The commentary that follows below provides an overview of the changes to the Rules.

The government's aim was to reduce administrative burdens and thereby permit financial savings to be passed on to creditors. The changes only affect administrations and company voluntary arrangements, i.e. those procedures reserved to the UK Parliament.

Standard content for Edinburgh Gazette notices and other advertising

The amending Rules introduce "standard content" provisions to ensure that all notices in the Edinburgh Gazette include the necessary information that readers of the notice may need in respect of the insolvency concerned.

The Rules also introduce a new requirement for standard content for notices advertised otherwise than in the Edinburgh Gazette. These notices are discretionary on the part of the insolvency office-holder. These requirements are a 'cut down' version of the required minimum 'standard content' for gazetted notices reflecting the required minimum for these adverts and increasing the discretion available to an insolvency office-holder on contents.

The new advertising provisions introduce the possibility that advertisements might be contained in media other than newspapers.

Meetings and resolutions

Provision is made for remote attendance at creditors' meetings in a CVA, in an administration and creditors' committee meetings

Rules on the requisite majorities in CVA meetings are being written out in full, rather than the current practice of using the common rules in Part 7. Additionally, the rules to mirror, in their entirety, the provisions of the equivalent requisite majority rule in England & Wales (Rule 1.19 Insolvency Rules 1986) that were not previously present in the Scottish rules. This is to ensure that the approval of CVA resolutions is the same throughout Great Britain.

Creditors' committee

Currently, the rules on administration creditors' committees in Scotland are codified by applying (with necessary modifications) the committee rules from receivership, which in turn apply the rules (with necessary modifications) from liquidations. This was awkward for users of the rules.

The rules on creditors' committee are therefore included in full, in Part 2, in these amending rules and incorporate changes made in the administration committee rules in England & Wales.

Remuneration and expenses

An administrator or other qualified insolvency practitioner will now be able to recover remuneration charged and expenses incurred before the formal start of the administration. This is an important change given the considerable expenses incurred prior to appointment where a pre pack administration sale is negotiated prior to the administrator's appointment.

Electronic delivery

A key government objective in the modernisation of the legislation is to facilitate the delivery of documents electronically. The amending Rules make a number of provisions facilitating the sending of documents by electronic means. The general principle is that documents may be delivered by electronic means provided that the recipient has consented and provides an electronic address. The provisions do not apply to petitions or applications to court, evidence in support of such applications or petitions or orders of the court; nor do certain other provisions apply to the filing of notices or other documents with the court, or the submission of documents to the registrar of companies.

The change brings into statutory force the decision in Gould v Itmo Advent Computer Training Ltd), in which the English High Court held that e-mail could be used as a means by which to notify creditors of the appointment of administrators and send the administrators' proposals and other reports to creditors.

A new provision for the use of websites by office-holders is included. In Addition, a new provision is made that allows the court, where it is satisfied the expense of sending notices too great, to dispense with the requirement for notices to be sent on each and every occasion and instead allow the requirements to be satisfied by the sending of one notice alone to cover all circumstances. This is to reduce costs where because of the number of persons entitled to receive a notice on each occasion, the cost is disproportionate to the benefit of sending the notices every time.

Authentication of documents

The CVA and administration rules now generally adopt the concept of "authentication of a document" rather than requiring a 'signature', again in order to facilitate electronic delivery. The provision follows that provided for by the Companies Act 2006. For paper documents a signature is sufficient authentication. For non-paper documents a document is sufficiently authenticated if the identity of the sender is confirmed in a manner specified by the recipient or where there is no such manner specified, if a communication contains or is accompanied by a statement of identity of the sender and the recipient has no reason to doubt the truth of that statement.

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.