The new UK Insolvency Rules, which will affect creditors’ rights in the majority of insolvency procedures, come into force today, 6th April 2017. These changes are designed to make sure that insolvency processes are as streamlined and efficient as possible, which should minimise costs and maximise returns to creditors. The key changes are:
No more creditors’ meetings
Creditors will no longer be asked to attend meetings or send others on their behalf, instead they will be faced with a range of ‘decision making procedures’ which are outlined below. After today, meetings in person may only be requested by creditors representing 10% or more (in number or value) or by 10 or more individual creditors.
Deemed Consent Procedure
Deemed consent is a tool for facilitating creditors’ decisions. It allows for notice of a decision to be given to creditors which is treated as having been approved unless a minimum of 10% (in value) of creditors object. Some key decisions can’t be made by deemed consent such as decisions relating to the remuneration of the insolvency practitioner or the approval of a Company or Individual Voluntary Arrangement. It can however be used for the appointment of liquidators so if creditors want a say in who the liquidators should be, they will need to object to the deemed consent procedure and request an alternative decision making procedure.
Decision Making Procedures
As the substitute for physical creditors meetings, the new rules provide for insolvency practitioners to used a range of ‘decision making procedures’ to conduct the affairs of the insolvent debtors. As well as the deemed consent procedure, these include decisions made by correspondence, electronic voting, virtual meetings and any other procedure which allows creditors to participate. These new rules state that each notice to creditors must contain prescribed information relating to the decision sought with guidance notes instructing what decision making procedure is to be followed.
Communications with creditors and opting out
The new rules are, in part, to modernise the legislation. Communication with creditors can now be by email where the creditor agrees or is deemed to have agreed by having communicated with the debtor by email before. Furthermore, websites can now be used by insolvency practitioners to enable creditors to log in and have access to documents relating to the insolvency proceedings. If a website is to be used, creditors will be sent access details in the initial correspondence sent out by the insolvency practitioner. After this initial notice, it will up to the creditors to keep checking for any subsequent information.
If a creditor does not want to receive any communication on an insolvency they can elect to opt out. If opted out, they will still receive key information such as notice of distributions and other prescribed notices. They will also still be able to vote.
No more statutory forms
The use of statutory forms has been abolished in the new rules. For example, creditors no longer need the standard ‘proof of debt’ form to notify the value of their claim. Instead, they only need to notify the debt in writing (including by email) to the officeholder.
Claims under £1,000 deemed accepted
The new rules provide for officeholders to advise creditors whose claims are under £1,000 that they are deemed to be agreed without any further process. If a creditor receives this notice but their debt exceeds this value they should respond promptly to correct the position.
These rules represent the biggest reform to insolvency legislation in 30 years and intended to improve the position for creditors by reducing cost, improving returns and speeding up procedures with the use of electronic communication. It may take some time for insolvency practitioners to get to grips with these new rules, but creditors should be aware of these rules if they want to be involved in an insolvency process. The use of the deemed consent procedure is likely to become the most used tool in decision making, so creditors should be ready to act promptly if they have objections to the decisions being sought.