The New Insolvency Rules (SI 2016/1024) came into force in April 2017. See my article “New Insolvency Rules are coming in April 2017". They had the specific purpose of modernising and streamlining existing rules which had been in force for 30 years.  Have they lived up to that brief in practice in the last year?  This article takes a brief look at whether the New Insolvency Rules have aided the insolvency practitioner and insolvency processes in general.

Statutory Forms

Taking the main points I highlighted in my original article, the New Insolvency Rules did away with statutory forms for insolvency proceedings. Companies House ended up producing their own which are frequently used.  However, one commentator has noted that forms drafted by insolvency practitioners or creditors themselves can now often miss crucial pieces of information, such as company numbers or court references and so in some cases, the lack of statutory form can lead to more confusion or mistakes being made in respect of filing deadlines.

Creditors Meeting

Creditors meetings are now more virtual than physical. This is perceived as a good thing for creditors who often did not attend meetings or vote at them.  Creditors can now join by Skype or by teleconferencing which is more attractive than travelling to a physical location.  Often though the old style creditors meetings were an opportunity for the insolvency practitioner to learn more about the underlying relationships between the directors and creditors, which can add a helpful layer to negotiations as the insolvency progresses.

Deemed consent

Deemed consent was one of the main changes in the New Insolvency Rules, meaning that the insolvency practitioner could notify the creditors of a proposed decision and this is deemed as approved unless more than 10% in value of the creditors object to this decision.  Insolvency practitioners have reported that this works well for smaller cases and has, on the whole, lowered overall costs.  Although, others have said that when a creditor does have issues to raise and wants a physical meeting (i.e. disagreeing with deemed consent), it can be difficult to arrange in the timeframe.  It can mean there is less cooperation with other creditors, largely because they don’t know who the other creditors are until the last minute as they no longer receive as much notice of an impending liquidation. 

Small debts

The New Insolvency Rules allowed for debts of £1000 to be submitted without proof in an effort to save time and costs for smaller creditors.  There has been discussion about whether these creditors would prefer to be in control of submitting their claims and use their own information as proof rather than rely on a company’s books where financial recording may not have been their strong suit (hence perhaps a reason they are in an insolvency situation…).  While the debt of £1000 could be extremely significant to some companies, these claims rarely get paid out in practice often because of the size of the dividend.

Conclusion

It does seem that the New Insolvency Rules have been welcomed on the whole.  The increased use of email and the removal of physical meetings has, reportedly, caused creditors to get more involved in the insolvency process.  There are some teething problems and confusion now there are no standard forms to be used and some notices may be sent by email and others must be sent by post, which could lead to delay and error. Creditors are no longer routinely updated and must go looking for progress reports. 

So whilst the New Insolvency Rules have caused some head scratching and ‘unlearning’ of familiar procedures for insolvency practitioners and their advisers, it has also had an impact on creditors of insolvent companies.  If you find yourself having to deal with a potentially insolvent company or are a creditor and have debts owing to you, please do contact Ortolan Legal to help you through the minefield of these New Insolvency Rules.