Friday, January 24, 2014

Timing issue with the latest IVA Protocol update

The IVA Protocol and Standard Terms have been revised. This posting is an extract from a note we sent to our Gold Service and Silver Service clients when updating our IVA packs.
The instructions on the Insolvency Service web site say that the new protocol and standard terms “should be used for all protocol compliant IVAs entered into from 1 January 2014”.  
Given that we were only told about this on 24 December 2013, we think this is not very realistic. Added to which, when does someone “enter into” an IVA? If the debtor “enters into” the IVA when they nominate an IP as nominee and the pack is issued, then all cases from 1 January should have been issued with the new terms. Since this would mean that the debtor has been given incomplete advice (e.g. about the new property clause), we think this could be difficult. If you argue that the debtor only “enters into” the IVA when the meeting votes on it, then all meetings after 1 January are caught, but we feel that is inappropriate, as the creditors will not have seen the revised protocol and terms so won’t know what they are voting on.
We suggest that whatever you decide to do, you should keep a detailed explanatory note, but one approach might be:
  1. Treat all new cases where the debtor contacts you after 1 January 2014 as new protocol cases. If you have already done SIP 3 meetings for pre-January contacts, but can still issue with the new protocol terms, ring them back and cover the changes and then issue them as new protocol arrangements.
  2. However, for all cases where you issued the proposals pack before 1 January 2014, leave them on the old protocol and terms, but note in the minutes of the meetings that the protocol changed, and because the arrangement was approved under the old terms it is not, technically, protocol compliant. Make it clear that you don’t think it makes any difference, but invite creditors to get in touch if they object. Say that as far as reasonably practicable you will operate the arrangement in accordance with the revised protocol.  

This is not a definitive answer, because the requirement is uncertain, or if read literally is impractical. However, given the general principle behind the protocol we think that you should try to implement the new terms on as many post 1 January 2014 cases as you can, within practical limits. If you are issuing new cases now without using the revised terms you have to make it clear that they are not strictly protocol compliant and why.