Removing the need to automatically advertise in insolvency cases in England and Wales and in some case types in Scotland is certainly a positive change that is to be welcomed, as is the removal of the need to file adverts in Court in bankruptcies and compulsory liquidations in England and Wales. The recent Dear IP also encourages IPs to be creative in the approach they take, and we can already visualise some of you booking media courses for when you appear in the television or radio advert telling creditors all about your most recent case.
It will be interesting to see if the RPBs/JIC issue any guidance in due course on when you should advertise. We do not think that such guidance will be necessary, and that Dear IP is sufficient, the key part being the phrase that discretion to advertise should be used “.. where clear benefits or a business need can be identified.” Since you will have to make a positive decision to advertise then you should develop a practice policy setting out when you will advertise on cases, and we can see the monitors checking for compliance with your policy. Our initial thoughts are that any policy should start with a statement of the assumption that an advertisement will not be placed unless a positive decision is made by a suitably senior person within the practice.
Dear IP is useful in identifying criteria for advertising in a case, and I suggest that your practice policy could also include:
significant numbers of customer deposits;
where the directors are not co-operating – e.g. hostile administrations where you have been appointed by a QFCH or creditor;
or where there are a lot of creditors where the directors have been unable to provide addresses.
The assumption is that when you need to advertise, you will place an advertisement in a local paper, but as Dear IP states, you should consider getting creative, although you should still keep a grip on reality, particularly from the cost perspective. For example, if you have an insolvency that traded in a sector where there is a trade magazine consider advertising in that instead, and certainly in the current climate local papers are interested in insolvencies affecting local communities, but it could be more time consuming and costly to the estate to arrange an interview with a local reporter or to prepare a press release.
This brings us neatly on to the stated policy aim of the legislative change of providing “ ... savings in the cost of administering insolvencies which are expected to be passed on to creditors by way of better returns.” We are not convinced by this. It is a nice concept, but not grounded in reality. The cost of each advert in the context of each appointment is hardly earth-shattering. Nor does the new approach take into account that many cases have minimal or no assets and that the insolvency administration is either funded by those assets and/or by funds provided by the directors personally, with little or no money left for creditors. The reduction in advertising costs will merely reduce the IP’s time write offs and help offset some of the cost of having to deal with all the other required compliance work on the case irrespective of the level of assets. For large cases then the advertising will represent only an insignificant percentage of total realisations and total costs, such that the impact of the costs savings by not advertising will be de minimis. There will only be a limited number of, for want of a better word, medium sized cases, where there is potential for the cost saving to be passed on to the creditors, but even then IPs may well take the view that they will merely reduce their time write offs in such cases to recoup some of the additional costs they have to bear for increased compliance costs in recent years, including the recent obligations imposed by SIP 16. It will be interesting to see how the RPBs monitor this issue.
Finally, a few words of caution. The legislation comes into force on 6 April, so technically you have to keep advertising until then. Even then, watch out for the pre-meeting adverts in CVLs and MVL/CVL conversions which require a different kind of legislative change and may not happen at the same time. However, now that the regulator of regulators and head of all things legislative in insolvency has come out publicly and said that change is on the way, it would be unfortunate if any regulator enforced the rules too strictly in the interim. Sadly for Scottish IPs, things are less simple and only the CVA and administration adverts will be affected, all others will stay for now and the proposed legislative fix for the CVL and MVL/CVL conversion meetings above will not apply to Scottish cases either. Even more sadly, for Northern Ireland IPs you seem to have been left out of the party all together for Northern Irish cases at the moment, but your time will come!
