The Insolvency Service is now making significant progress on its project to update and consolidate the secondary legislation. Having already amended the advertising rules, they are about to publish details of the new rules dealing with notices, meetings and Court filing among others. Although not likely to enter the statute books until April next year, the Insolvency Service has decided to publish a draft set of rules with the amendments incorporated and highlighted that will be available on their website. This is too late in the legislative process to be treated as consultation, but is a great way of helping us all to get ready for the changes when they come in. We have been known to have the odd “pop” at the Service and other regulators in the past, but this seems like a great idea and we look forward to getting into the detail.
For now, we’ve prepared a very brief summary setting out the main areas that are likely to be affected by the changes. Most of the changes appear logical and could even produce savings, although we do not share the Service’s opinion that it should all get back to creditors because we think that many of the relevant costs are already absorbed in write-offs that IPs suffer in most cases. Our biggest concern, and probably your own, is the proposed change in how remuneration is approved and reported. Change was bound to happen after the adverse publicity of the last two years, but we have not seen the detail yet. We will keep a close eye on the proposed changes and ensure that our clients’ systems are amended to account for them as soon as the rules change.
This is only an initial blog article on the topic and we hope to provide more detail when we receive it from the Service. The main areas are likely to be:
1. Electronic Communication
We expect the changes to allow IPs to communicate electronically with creditors, members and third parties by consent, although hard copies are likely to have to still be available on request.
2. Authentication
New authentication provisions are proposed, to replace the existing requirement that all insolvency documents must be physically signed.
3. Meetings
Meetings must generally be held at a physical venue under the current legislation. The changes should give you the option to allow attendance at a meeting by telephone or electronic means (e.g. via an internet chat room or video conference).
4. Internet use
You may be allowed to place reports and proposals on a website as an alternative to sending them to all creditors by post, although you will still be required to notify creditors about how to access them in a posted or e-mailed notice. Again, creditors will be able to request a hard copy of any document if they wish.
5. Statements of truth
We expect the changes to allow for documents that currently have to be affirmed by an affidavit to be verified by a statement of truth. Proceedings for contempt of court may be taken against any person who makes a false statement in a document verified by a statement of truth, so this should still be a reliable way of obtaining information.
6. Remuneration and Reporting
This is the change that causes us most concern and we will have to wait for the detail to see what further comment is appropriate. We expect the new rules to introduce more options for the basis of remuneration that creditors and members can fix, and also provide a system of more regular reporting to creditors. Creditors may be able to request fuller particulars and to challenge any amounts where they consider them excessive.
There will be a bonus to offset this, in that we expect the requirement for annual meetings in liquidations which have lasted for more than a year to be dropped. However, as we said in one of our earlier articles about the advertising changes, we must wait to see if the change to annual meetings will be retrospective in any way. It could either just cover the single year’s appointments (6 April 2009 to 6 April 2010) where you will have to gazette annual meetings, or it could be truly retrospective and do away with annual meetings in all liquidations that pre-date the legislation, so that all cases can be treated consistently after the new rules are introduced...but that may be too much to hope for.
7. Pre-appointment Administration Expenses
At last!! There will be specific rules allowing you to seek approval for pre-appointment work in administrations provided that the work has helped to achieve the objective of the administration. There will be a requirement for details of that work to be disclosed and approved within the administration proposals.
8. Standard Content for gazette notices and advertisements
Notice of insolvency events for the London Gazette (and any other form of advertisement that you see fit to use) will be required to follow a standard format. The Service thinks that this will not cost the estates any more and we go further, anticipating a reduced cost, as case management software providers should be able to produce notices within your standard packs and you will be able to take advantage of online instructions to cut out the time and cost incurred by using agents.
9. Reduction in Court Filings
Many of the requirements for documents to be filed with the court will be removed. In some cases documents will only be filed with the Registrar of Companies, where they will be more accessible to creditors
10. Disclosure in bankruptcy
The Rules will allow debtors facing bankruptcy who consider themselves at risk of violence to apply to the court for an order to limit disclosure of their address.
As we have already indicated, all of this is subject to confirmation and receipt of more details, but the initial brief appears positive and we await developments with interest.
