Like you, we have been ploughing our way through the new rules and the contents of the regulatory reform order that are coming into force on 6 April 2010. They are a dense, almost impenetrable mass of detail, particularly the transitional provisions, but the good news is that you do not need to have systems in place to deal with all of them on day 1.
This article is only designed as a brief overview of the key provisions to enable you to prioritise your action in implementing the changes, and so it should not be taken as a detailed statement of the content of the Rules and regulatory reform order.
From a compliance perspective, the most important set of provisions for IPs are those relating to gazetting as they have effect from day 1. The Rules prescribe the contents of gazette notices, and you must ensure that you comply with those provisions in respect of all cases that commence on or after 6 April 2010. The detail is set out at Rules 12A.33 to 12A.37 and you should contact your advertising agents or the London Gazette for assistance to ensure that your gazette notices are compliant. The Rules also cover the contents of all other adverts, even though such advertising remains discretionary, not mandatory. The detail is set out at Rules 12A.38 to 12A.41. Additional content particular to each notice is specified in individual rules but most of it is fairly logical; for example, if advertising your appointment you have to say that you were appointed and when you were appointed and what the company did.
Some of the other provisions that you need to be aware of from commencement of the new Rules are:
• Fee basis – the ability to take fixed fees, and to mix and match fee bases throughout an assignment, subject to committee or creditor approval.
• Standardisation of the period of notice for meetings of creditors – it appears that all meetings now have to be convened on 14 days notice, apart from final meetings which are on 28 days notice.
• Powers of liquidator and trustee – making the power to compromise exercisable without sanction.
• Pre-appointment fees in Administrations – in addition to the disclosure prescribed by the rules being made in the proposals, a separate resolution approving pre-appointment fees must be taken at the paragraph 51 meeting if held, or approval obtained from those responsible for approving remuneration if a meeting is not held.
• IVAs – various detailed changes, including no longer having to file documents in Court when using the non-interim order route. We are still considering where this places them under the EC Regulations. We are concerned that they may no longer be a court process recognised under the regulations so could be challenged by proceedings in other jurisdictions. We would love to hear from anyone who has had the chance to obtain a definitive opinion.
• Joint supervisors in IVAs/CVAs – where two or more IPs are to be appointed supervisor, a separate resolution needs to be taken at the meetings of creditors, and of the company, dealing with the basis on which they are to act, i.e. whether they are to act jointly, or jointly and severally.
• Committees – various detailed changes in all case types.
• Disclaimer – removing the Court from the process in liquidations, although we understand that some firms of solicitors have already indicated that there are pitfalls with the revised approach.
• Annual meetings – we raised with the Insolvency Service the wording in the 2009 Rules that meant that for CVLs and MVLs commenced on or after 6 April 2009 the annual meeting would need to be gazetted. This glitch has been fixed in the 2010 Rules so that there will be no need to gazette annual meetings for such cases.
The big headline provisions from the Insolvency Service’s perspective are those relating to electronic delivery of information to creditors, remote attendance at meetings, and annual/final reporting and remuneration approval. However, these either need not, or actually do not have any immediate impact for IPs.
Whilst the electronic delivery of information and remote attendance at meetings could see some cost savings for IPs, they are optional and so need not be implemented on day 1, if at all. With some potentially complex IT matters to overcome, we suspect that website-based reports may not become the norm for some time. In addition, the need for positive consent from individual creditors before notices can be given electronically may even mean that a willing IP with appropriate systems at his disposal may not be able to take full advantage in the face of creditor apathy or hostility to the concept.
The annual/final reporting and remuneration approval provisions will not have effect until the first reports fall due which will be at the end of the first year of operation of the Rules, unless a case commenced on or after 6 April 2010 is closed in less than a year.
We are currently working to update our review checklists and will let clients know when they have been completed.
