The new Insolvency Rules 2016 came into effect 6 April 2017, completely replacing the previous conventions, and aim to modernise, streamline and speed up insolvency procedures.
The new rules replace the Insolvency Rules 1986 and their subsequent amendments. New technologies have dramatically altered the way in which businesses communicate and operate, so the insolvency rules have changed to reflect this.
Insolvency practitioner Mike Gillard takes a look at the new rules and outlines the biggest changes coming into effect this April.
Bringing insolvency into the modern age
These new rules have been approved and put into place to reflect the modern way in which companies are conducting business. With new ways to communicate including email, social media and online forms, for example, insolvency procedures have been adapted to keep up with current forms of communication.
Cutting down and removing unnecessary meetings
One area of the insolvency procedures that can be costly is creditor meetings. The new rules look to reduce costs and increase creditors’ engagement by using other forms of communication to gain and deliver information to and from creditors.
Final meetings are abolished, along with Section 98 meetings (initial creditors meeting) in Creditors Voluntary Liquidation, unless requested by a creditor within a prescribed time period. Instead of a Section 98 meeting, the ratification of the appointment of the shareholders’ liquidator can now be obtained via a process of deemed consent.
Another significant change is the use of electronic communication, which can be used to replace postal correspondence. This not only speeds up the process of delivering information, but also saves time and cost in the insolvency process.
Opt in and out of correspondence
Along with the increase in email usage and digital communication, creditors can now opt in and out of correspondence during an insolvency procedure. In some cases, creditors may no longer wish to require reports if a dividend in the matter is unlikely. Previously creditors would receive all correspondence via post whether they wanted to or not.
Other changes include office holders being able to agree to creditor claims of under £1,000 without having to go through a full enquiry into the debt (if the accounting records or Statement of Affairs shows the debt).
The new changes aim to streamline and increase the speed of insolvency processes, helping save both time and money, which in turn could see dividends to creditors increase.
Mike Gillard is a licensed corporate insolvency practitioner at MGJL.co.uk