Tuesday, September 11, 2018

Companies House delays

We continue to receive queries about delivery to Companies House, so we wanted to remind you about our Blog post on this subject, which you can find here.

In short, a document is not ‘delivered’ to Companies House until it is received by them in a format which is suitable for filing, meaning there are no mistakes or missing documentation. The problem is that you will not know that it has been delivered until it has actually been registered, as it could be rejected at any time during the registration process and we have been shown examples of Companies House taking 21 days to file documents.

The delays being seen with Companies House are frustrating in all case types, but they could potentially cause a more significant problem in Administrations since, depending on the exit route used, the effective date of cessation of the Administration can be when a notice is registered at Companies House. We can envisage a situation where Companies House could reject a notice of move from ADM to CVL so late that it cannot be re-issued before the Administration has automatically expired. This could end up with you having to seek directions from the Court as to what to do next, and there is no certainty that the court would be able to find a way to validate the conversion to CVL. The court might, for example, have to wind the company up so that the Official Receiver is appointed liquidator, which could make it difficult for you to get the appointment back.

As a result, we would remind you to ensure that you send in your conversion notices in plenty of time prior to the automatic expiry of the Administration. You should carefully check the format and content of the notice and the accompanying progress report to ensure that there are no reasons for Companies House to reject them.

Monday, September 03, 2018

Decisions to Establish a Committee

We have seen a couple of instances recently where only one or two creditors have voted at a decision by correspondence to fix the basis of the officeholder’s remuneration. As is required by the Rules (other than in CWUs) the officeholder invited creditors to establish a committee at the same time, also by way of a decision by correspondence. Unfortunately, the creditors who voted to approve the officeholder’s remuneration also voted in favour of the decision to establish a Committee. As a result, the creditors voted to establish a Committee, albeit with no nominations as to who is to act on the Committee.

It was not possible to rely on the decision of the creditors fixing the officeholder’s remuneration passed at the same time, since it would fall to the Committee to fix it once it had been established. This situation is covered by rule 17.5(4), which provides that where a decision has been made by the creditors to establish a Committee, but not as to its membership, the officeholder must then seek a decision from the creditors as to who is to act as the members of the Committee. If creditors nominate at least three creditors to act on the Committee during that second decision procedure, and they agree to act, then the Committee will be duly established. If, however, creditors do not nominate at least three creditors to act, then at that stage the officeholder can say that no Committee has been established and go on and seek a decision from the creditors to fix the basis of their remuneration. Note that the original fee “approval” obtained at the earlier decision procedure cannot be relied upon and a new decision is needed.

Rather than holding a further decision procedure to fix the basis of remuneration, when seeking the decision to nominate Committee members the officeholder can seek a decision to fix the basis of remuneration at the same time. The notice convening the decision procedure just needs to make it clear that the decision will only be sought if insufficient nominations are received for creditors to act on the Committee.

One other point to remember in all this is that once a creditor has voted at a decision procedure, other than a meeting, they cannot change their vote. As a result, even if you spot that the only votes you have from creditors during the first decision procedure are in favour of all the resolutions you sought, i.e. in favour of both the formation of a Committee and your fees, you cannot get them to change them and vote against the formation of the Committee.

Sunday, May 20, 2018

Stop Press! R3 Creditors Guide Microsite is back

The R3 Creditors Guide Microsite is back. The shiny, new version can now be seen, so our earlier warning to suspend any reference to it in your documents can now be ignored.

Well done to everyone involved in getting the new design operational.

Wednesday, March 28, 2018

Notices to creditors to opt out

In CVLs we have seen instances where the notice to creditors to opt out has just been put on a website and creditors have then been directed to it in the initial letter to them following the appointment of the liquidator.  We have sought clarification from Policy Division of the Insolvency Service (IS) as to whether that approach is permitted given that rule 1.39 says that “the office-holder must, in the first communication with a creditor, inform the creditor in writing that the creditor may elect to opt out of receiving further documents relating to the proceedings.” 

The IS have now responded to us and indicated that their view is that, because of the wording used in rule 1.39, the information about opting out cannot just be put on a website and must be included as part of the first communication with creditors.  Their reasoning for that approach is that “if a website is to be used then a notice must be sent to the creditors explaining how to get access etc (see rules 1.49 and 1.50).  That would mean that there are communications before the use of the website in which the option to opt out would need to be explained.”

The information on opting out can either be included in the body of the first letter to creditors, or sent as an enclosure to that letter.  While we have seen it most often in CVLs the comments in this Blog apply equally to other case types.

Wednesday, March 07, 2018

R3 Creditors’ Guide microsite


Some of you may have noticed that the R3 Creditors’ Guide, www.creditorinsolvencyguide.co.uk website is currently suspended for a redesign. We think that the site is a useful resource that, in conjunction with the SIP 9 Guides to Fees, helps to meet the SIP 9 requirement to inform creditors of their rights.

We are aware of at least one regulatory monitor asking why the link is included in circulars when the site is not operating. The simple answer from our perspective is that we expect the site to be up and running soon and it is not worth amending all of our standards to take it out, only to have to re-insert it afterwards. In most of the cases that the monitors will be reviewing at the moment, the link was working when the notice was issued.

However, to avoid upsetting anyone, we recommend that you delete the link to the creditor guide site from any standards as you use them, until it is up and running again. We will try to remember to Blog an update when it is back in action.


Tuesday, January 30, 2018

Remuneration and the new, improved 18 month rule

One of our abiding complaints about the old rules was the so-called 18 month rule, which restricted an office holder to scale rates if fees were not fixed by the creditors within 18 months of appointment. The New Rules still contain provisions which require an officeholder to fix the basis of their remuneration within 18 months of their appointment in order to avoid problems, although the effect of failing to do so depends on the case type involved.

Rule 18.22 deals with the position for Liquidators in CWUs and Trustees in BKYs. If the officeholder has not fixed their remuneration within 18 months of their appointment, then they are entitled to remuneration on the statutory scale. However, in an improvement over the old rules, if the officeholder considers that their remuneration using the statutory scale is not sufficient, or is inappropriate, then rule 18.24 allows them to ask the creditors to increase the percentage of realisations and/or distributions they can charge, or to change the basis of their remuneration. If the creditors do not pass the decision sought, or indeed instead of asking them, the officeholder can apply to Court.

The position is different for Liquidators in MVLs and CVLs, and Administrators, and it is covered by rule 18.23. That rule does not impose an 18 month deadline from appointment for the officeholder to fix the basis of their remuneration per se, but it does prohibit them from applying to Court to fix the basis of their remuneration more than 18 months after appointment. If creditors or a committee have not fixed the basis of an officeholder’s remuneration within 18 months of their appointment, then there is nothing to stop them from continuing to seek a decision from the creditors/committee once the 18 months has elapsed. However, there is no fall-back position for the officeholder if they do not do so, because the officeholder cannot use the statutory scale as rule 18.24 does not apply to such case types, and they are prohibited from applying to Court.

If you are approaching the 18 month date on a case without having fixed the basis of your remuneration, then you need to consider your strategy, which will depend on the particular circumstances of the case. If, for example, the only creditors are HMRC and/or banks that have a policy of not voting on decisions, then you might consider seeking a further decision from them to fix the basis of your remuneration, but making it clear in the documentation that if they do not do so, then you will have no alternative but to apply to Court to fix the basis of your remuneration which will, inevitably, increase the costs of the insolvency procedure. If, however, you are confident that the creditors or a committee will fix the basis of your remuneration once you have completed your investigations, or administration of the case, then you could decide not to take any action. Although the new rules are more helpful, you should be aware of the risk that if they do not vote, you may not have another method of fee approval. If you have creditors who will not vote, despite warnings, or who are deliberately taking advantage of the rules to be obstructive, you should apply to court early and avoid the risk of deadlock.

Thursday, January 18, 2018

Companies House Scanning - an update pre-empting Dear IP


This is an update to our last article about problems with filing light and double-sided documents at Companies House. We have received some helpful information from around the profession and we had a lovely long response from Companies House, so we think that we can now give you some useful advice on how to avoid problems.

We should start by saying that Companies House have indicated that they will provide their official advice in Dear IP. We have told them that we’d publish this as well, as it is likely to be quicker.

Companies House confirmed that that it “has tightened its procedures recently”. Putting aside our view that this could have been communicated better, the following points first explain the problem, then suggest a practical solution. All this is in the hope that by telling you that there is a problem, you can avoid it in future, saving yourself from regulatory trouble, while also rightly helping to ensure that the integrity of the Register is given priority.
  1. Light copies 1 – In the standard PDF Form 600 available on the IPS case management system, there were different fonts in the original print that were being rejected. Turnkey have confirmed that they were aware of the problem some weeks ago and amended the Form in an update. Please ensure that if you use Turnkey’s IPS system, you are using the latest update.
  2. Light copies 2 – Documents had been submitted where writing had been inserted using blue ink, or very faint ink, or ink that was significantly lighter than the rest of the print on the form. Companies House instructions do require “black ink or black type”. You should check documents on receipt and, if there is any doubt, get the document completed again so that it is darker. This is only going to happen more often with systems adapting to the New Rules and more documents being completed remotely and communicated electronically. You have to ensure that the version you finally send to Companies House is still clearly legible and consistently dark.
  3. Errors – We all make errors, but given the potential significance of a document not being “delivered” to Companies House, you have to take extra care. If you think that Companies House are being unreasonable in requiring you to get every detail correct, see our earlier Blog article here about what happened when they made a tiny error. They will be very precise and they are right to protect the integrity of the register. Knowing that, therefore, you should take extra steps to check documents before they are sent. Consider whether every relevant box has been completed, that any dates are correct and complete, and that any signatures are in the right place. You will still make the occasional error, but it is in your best interest to minimise that risk.
  4. Double-sided documents – Companies House have said that although they do accept double-sided documents, it causes them extra work if the document starts on the back of something else, such as a covering letter. Companies House has said that they were not rejecting documents that were incorrect, but that if they rejected a document for some other reason, they would also mention the double-sided problem, to educate the user for future filings. The Register can only have the filed document on it, so please ensure that, if you send a covering letter, it is separate, so that the Form stands alone and can be scanned from the first page to the last without extra, irrelevant, pages that don’t have to be filed. 
We have to finish, I am afraid, with a warning. Despite the potential consequences of a document not being “delivered” on time, Companies House have made it clear that they cannot allow a period of grace. The new procedure will be followed and light or incorrect documents will be rejected. We have asked them to get together with the Insolvency Service and see if there is scope for a more satisfactory long-term solution. We said, “while we understand that you cannot provide a grace period for filing within the current framework, we would argue that between Companies House and the Insolvency Service there should be scope to amend the legislation so that, in future, the decision to reject documents purely on the grounds of scanning difficulties will not have such an extreme impact. One simple solution, although it would, no doubt, have further unintended consequences that would affect your operations, would be for a document to be deemed “delivered” under the insolvency legislation without reference to your Companies Act defined “receipt”. That would allow a light form to be delivered and meet the statutory time limits, while still allowing you to delay filing without such a significant impact on the insolvency proceedings.”. We have not asked Companies House to respond direct to us and we will leave it to them and the Insolvency Service to take action or issue guidance as they see fit.