Following discussion for a number of years, The Insolvency (England and Wales) Rules 2016 were enforced on 6th April 2017. The key intentions of the legislators are to increase creditor engagement in the insolvency process, thereby reducing some unnecessary administrative burdens which can reduce the returns to creditors. The Insolvency Act was first introduced in 1986 and the new rules represent the most significant legislative change to affect the insolvency profession since then. The Insolvency (England and Wales) Rules 2016 have simplified language with the intention of making them easier to follow and amalgamate the previous rules and the amendments into one piece of legislation. Jason Elliott of The Insolvency Experts gives his brief overview of the new rules.
Impact on creditors
- Physical creditor meetings
These have been abolished unless requested by the creditors. Creditors will be requested to make decisions by, for example electronic voting and virtual meetings. If no creditors object within a specified period then the decision is deemed to have been approved and insolvency practitioners can rely on this using the deemed consent procedure. The insolvency practitioner can select the best suited method for the creditor, facilitating the creditors’ part in the decision making process.
- Individual insolvency process
Essentially the new rules leave individual insolvency processes such as liquidations, administrations, bankruptcies and individual voluntary arrangements (IVAs) unaffected, although they do simplify matters. The requirement for a final meeting has been removed. Also, an insolvency practitioner can now accept debts of under £1,000 for distribution purposes without the consent of the creditor. This will be particularly useful in IVAs where low creditor values are common and overall will simplify administration for both the insolvency practitioner and the creditor.
There is the requirement for insolvency practitioners to provide significant additional information to creditors regarding their new rights and obligations. It is anticipated that the rules will lead to enhanced creditor engagement and thereby produce increased returns. Creditors, directors and insolvency practitioners need to be fully prepared for the new rules.