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The new Insolvency Rules 2016 come into force today, 6th April 2017.

Objective: to modernise and streamline the insolvency process in order to reduce the costs and potentially increase returns to creditors. The new rules both consolidate and update the 1986 Rules and represent the biggest change for 30 years, reorder and restructure the rules and consolidate 23 pieces of amending legislation (over 100 amendments).

They also provide a number of substantive amendments to existing insolvency law and practice including provisions from the Small Business, Enterprise and Employment Act 2015 and the Deregulation Act 2015  -  but will they be better for creditors? We will have to wait and see!
Key areas of change and their practical implications include:

Physical creditors' meetings discouraged – No S.98 meetings again!
An office-holder can no longer call a physical meeting of creditors unless requested to do so by a minimum number of creditors - S.98 meetings and final meetings abolished. Office holders will not summon physical meetings of creditors unless requested by to do so by either 10 per cent of the creditors in value, 10 per cent of the total number of creditors or 10 individual creditors, as brought into the Insolvency Act 1986 by the Small Business, Enterprise and Employment Act 2015.
Creditors' meetings - Deemed consent
A new alternative process for decision making – not applicable for fee approval or approving a voluntary arrangement.
Alternative decision making
As an alternative to deemed consent, decisions can also be made by electronic voting, correspondence, virtual meetings, physical meetings, or any other procedure that enables all creditors entitled to participate in the making of the decision to participate equally.
Changes to office-holder reports and communications
Creditors will be allowed to opt out of communications sent by the insolvency office-holder but are able to opt back in at any time.  This doesn’t apply to all communications.
Encouragement of email communications
Previously needed creditors consent, no longer.
Improvements to use of websites
Office-holders can now give notice to creditors that future notices will be published on a website without further notification to creditors or permission from the court - subject to certain exceptions, e.g., documents requiring personal delivery.
Deemed proof of low value debts (less than £1,000)
An office-holder may decide to treat that debt as proved for the purpose of payment of a dividend.
Automatic appointment of official receiver as first trustee immediately upon the making of a bankruptcy order
Technical change so that there is no longer any delay between the making of the bankruptcy order and the automatic vesting of property in a trustee.
Statutory Forms
All reference to statutory forms are removed replacing them with individual rules that set out the content requirements of prescribed notices and documents – the intention is to future-proof the rules.  Note: Companies House is still likely to retain its forms.
Richard Rones comments:

Whilst it is recognised that some of the Insolvency Rules, from a procedural perspective, needed updating and brought in line with modern technology, will it in fact increase the efficiency of the insolvency process and result in an improved outcome for creditors?
I can see that the changes will require insolvency practitioners to bring their businesses in line with 2017 technology, but there are a number of technical challenges for both insolvency practitioners and creditors, including confidentiality and security in the use of virtual meetings, e-voting and e-communications, as well as the ability of creditors to be able to participate.

The discouragement of physical creditors' meetings and the impact on creditors' engagement are both concerning, as much from creditors' perspective as from debtors.
In my view, the initial meeting of creditors provides an opportunity not only for creditors to raise any concerns but often for those concerns to be addressed and dealt with at that meeting - saving unnecessary delay and expense.  Without such an opportunity, will we end up with a regime that discourages creditor involvement and lowers their return, one of the key objectives for the changes?

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ThorntonRones – we put the solve into insolvency

ThorntonRones is a specialist insolvency practice experienced in advising on both corporate and personal scenarios.  The principal of ThorntonRones, Richard Rones, is a Licensed Insolvency Practitioner, a Fellow of R3 and a Fellow of the ICAEW. 

Richard has extensive experience in the SME market that includes trading as ThorntonRones Insolvency Practitioners since 1999. He and his staff fully understand the difficult pressures faced by anyone running their own business and relish the opportunity to be of assistance.

We look forward to taking care of you.
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