A bright member of staff at one of our clients has recently spotted an error in the new rules. Now, we know that drafting something that big was never going to be easy and we accept that errors will happen, but there has to be a system in place to deal with them. The reaction to this particular point, however, shows how ineffectual our current regulatory framework can be on occasions.
The error that was so cleverly spotted was that although non interim order IVAs no longer have to be filed at court, with notices now being sent just to creditors, rule 5.24(4) escaped the drafter’s attentions and that still requires that the report on an adjourned meeting of creditors to be filed at court.
We raised this with the Insolvency Service and suggested that if a legislative fix could not be put in place quickly, whether because of the election, Icelandic ash or other factors, then the regulators could agree to ignore any breach of the rule, given that it is patently incorrect, which has been acknowledged by the Service, and unworkable in practice.
After the Service met with the regulators, the response I received was that:
“Their collective view was that whilst practitioners should comply with the rule as it stands, a breach of it would normally be below the threshold for which disciplinary proceedings would be initiated.”
We consider this to be an entirely unsatisfactory response. If you tried to file the report at court when no other document had been filed on the case and no further document was ever to be filed on the case, the court would quite rightly return it saying that they did not have a clue what you were on about. It cannot, therefore, be right when the regulators know that the rule is wrong and is now on a list of rules to be “fixed” post-election, to treat failure to comply as a breach. We consider that the regulators should take a pragmatic approach in this specific instance and agree with the Service that failure to comply with it will not be treated as a breach given that the rule will be changed in the future, is of only minor import and is unworkable in practice.
There will always be errors in new legislation and we are not having a pop at the Insolvency Service who drafted it, but if any IPs have other examples of errors that they have spotted in the new rules, please feel free to let us know. We’d be happy to raise them with the Insolvency Service and the regulators and we will continue to push for a practical solution. It cannot be right for an IP to be in breach as a result of unworkable legislation.
