Headline changes include:
- reorganising the rules on more logical and clearer lines;
- improving consistency to make the rules easier to understand;
- using plain English; and
- making it easier for documents to be delivered electronically.
The rules have been restructured, for example by separating out the winding-up provisions into three separate parts for:
- members’ voluntary liquidation;
- creditors’ voluntary liquidation; and
- compulsory liquidation.
Undue repetition has been avoided through the greater use of common parts that apply to multiple insolvency procedures.
The new rules are a consolidated, restructured, modernised take on the 1986 rules which have been amended 28 times since they came into force. They also take account of changes made by the Deregulation Act 2015 and the Small Business, Enterprise and Employment Act 2015, removing red tape and abolishing certain physical meetings and paper forms. Although these changes are substantial, the new rules are supported by material to help you navigate the 'modernised' insolvency world.
The new rules replace the old (and all amendments) in their entirety and have been wholly restructured. However, the new rules helpfully come with non-legislative notes to prompt and guide readers. They also come with a derivations table which lets you track through old rules to their new rule equivalents. The Insolvency Service will also be publishing guidance by way of frequently asked questions on their website.
The Key Changes
Changes to creditors' meetings
Under the new rules, physical meetings will no longer be the default for creditor decision making and the rules specify alternative types of decision-making processes (including deemed consent and qualifying decision procedures). IPs will only be able to call physical meetings if requested by the creditors when asked to make a decision (subject to a few exceptions) and the use of virtual meetings is therefore encouraged. This is aimed at reducing costs and increasing returns to creditors.
Written consent for use of electronic communication (such as email) between the insolvency practitioners ("IPs") and a creditor will not be required in all circumstances. From April, where a debtor and a creditor customarily corresponded electronically pre-insolvency, the IPs may continue to correspond with such creditors in the same manner.
Use of websites
Court orders will no longer be needed to publish all future documents relating to the insolvency on a website. IPs will be able to send a notice at the outset informing creditors that all future documents will be made available online (although there are some excepted documents).
Abolition of final meetings
Final meetings of creditors will be abolished in bankruptcy and all types of liquidation.
Opting out of correspondence
Creditors may opt out from correspondence on the case (although notices of intended dividend are excluded) and creditors can also opt back into correspondence at any time.
Dividends on small debts
IPs will be able to pay dividends to creditors without a creditor having to submit a proof of debt but only where the debt is less than £1,000. However, if the creditor wishes to be involved in the decision making process, it will still need to prove its debt.
Appointment of Official Receiver as trustee in bankruptcy
An official receiver will automatically be appointed as the trustee in bankruptcy upon the making of an order, as opposed to being appointed as receiver and manager pending appointment of a trustee. This will remove the delay between the making of the bankruptcy order and the automatic vesting of property in a trustee.
Replacement of prescribed forms
Prescribed statutory forms will be replaced with specified content for notices and documents. This specified content is different from the information previously included in the statutory forms and even goes as far as to specify the order in which the content must appear.