Date : 11 April 2017
The Insolvency (England and Wales) Rules 2016 (IR 2016) were laid before Parliament on 25 October 2016 and came into force on 06 April 2017.
The IR 2016 revoke and replace the Insolvency Rules 1986 (the 1986 Rules). They are intended to consolidate the 1986 rules, increase efficiency and reduce cost, thereby improving returns for creditors. They are also intended as a way of "future proofing" the rules on insolvency generally by reducing the need for amendments to accommodate advancements in technology, business practice, and to enable e-delivery (see Explanatory Memorandum to the IR 2016).
Unlike the 1986 Rules, the IR 2016 do not prescribe statutory forms. Instead, Part 1 contains standard content requirements for various documents and specific rules set out the exact requirements for particular notices. Rules 1.8 and 1.9 allow for departure from prescribed format and content where circumstances require or the departure is immaterial, but strict compliance is necessary in the titles to documents and statutory demands.
With effect from 06 April 2017 the Official Receiver will immediately be appointed as trustee upon the making of a bankruptcy order, unless the court appoints a supervisor as trustee. This contrasts with the position under the 1986 Rules where the Official Receiver became Receiver and Manager of the bankrupt's estate pending appointment of a trustee.
Other interesting changes are aimed at reducing the cost of administering insolvent estates in order to improve dividend outcomes for creditors. These include:
This means that where an officeholder writes to creditors with a proposal and does not receive objections from more than 10% of creditors by value then the proposal is deemed approved.
As an alternative to deemed consent other procedures may be adopted, including:
An officeholder now cannot summon creditors to a meeting unless requested by either 10% of creditors by value, 10% of creditors by number, or 10 individual creditors.
The Small Business Enterprise and Employment Act 2015 makes various amendments to the Insolvency Act 1986 by effectively abolishing certain meetings. Section 98 meetings are no longer required in order for approval of a liquidator in a creditors' voluntary liquidation and the same must now be obtained either using the deemed consent procedure or virtual meeting.
Similarly, final meetings of creditors are no longer required in liquidation and bankruptcy and instead the liquidator or trustee must file a final report. The release of a liquidator or trustee is subject to creditors' rights to raise an objection within a prescribed period.
Creditors can now opt out (or back in) of receiving communications from officeholders, albeit some documents, such as notice of change of officeholder contact details, and notices of distributions will continue to be delivered in any event. The IR 2016 also encourage communication by email, and pursuant to Rule 1.45 a creditor who communicated with a debtor by email before insolvency proceedings were commenced is deemed to have consented to receive documents by email from the officeholder, subject to that consent being revoked before the document is sent. This provision will not apply to proceedings commenced before 06 April 2017.
The IR 2016 remove the requirement for officeholders to obtain the permission of the Court to communicate with creditors by publishing future notices on a website without also sending a notice to creditors that the specific document is available to view on the website. This is subject to exceptions, for example notices of intention to declare a dividend which require personal delivery.
Where a creditor's debt does not exceed £1,000 and the debtor's accounting records or statement of affairs record that debt then an officeholder may treat that debt as proved for the purposes of paying a dividend.
Authors: Duraid Al-Musaied and James Perry