We heard about a training provider where the trainer thought that IVAs would have to be varied to apply the new rules, but that would have to happen before the new rules come in. Our initial reaction, obviously, was that the trainer must be wrong. Surely the Insolvency Service would not make legislation that could require a variation of every existing IVA?
So, we asked the Insolvency Service, making it clear that our view was that the standard terms of any arrangement could only apply within the statutory framework, so that if the rules were changed, they would automatically apply to any existing arrangements without the need for a variation. Their reaction was not initially, very encouraging and they said “As you know, the Act and the Rules (both the 1986 and the 2016 Rules) are largely silent on what happens after the proposal has been agreed. For this reason,… it may come down to what actual proposals and their terms and conditions say about how variations etc. will be dealt.”
The problem, essentially, is that the old legislation did not refer to variations, so they are generally dealt with by the arrangement terms. Those, naturally given the legislation at the time, refer to meetings. The new legislation does not generally allow physical meetings. The question therefore arises whether IVAs should be the only cases where physical meetings continue, and then only for variations, or should the New Rules apply to variations, as they do to the approval of the arrangement? Our view, which we did not run past a lawyer, but which the Service have since confirmed, is that because paragraph 19 of the Protocol Standard Terms referred to specific Old Rule numbers and those rules will have been revoked and replaced, then the New Rules take over those references. That would mean that variations would be by “decision procedure”, which is likely to be a virtual meeting. However, that interpretation is less convincing in cases approved under the R3 standard terms, because paragraph 81 of those terms dealing with variations makes no reference to the rules.
It therefore appears possible that cases approved under the R3 standard terms might have to be dealt with under the old rules, with at least the first meeting after 6 April 2017 being conducted by a physical meeting. Even that is not certain, because the terms refer to “a meeting of creditors”, which might also cover a virtual meeting or some other New Rules “decision procedure”. The Insolvency Service is keen that IPs should not feel restricted to physical meetings in such circumstances. If only physical meetings could be used, since some IVAs approved under the Old Rules may continue for 6 years, you could have a situation where old legislation is being used in 2023, which has to be inappropriate. The Insolvency Service considers that because the New Rules do not interfere in post-appointment matters such as this in IVAs, using any sort of creditors’ meeting to vary the terms would be acceptable. For once, we are delighted to agree with them.
So, to summarise, the potential problem that was rumoured to be an issue is something of a damp squib. It almost certainly does not impact on the vast majority of IVAs, and in the cases where it could apply, a meeting of creditors will be able to vary the terms to remove any doubt that virtual meetings can be used in future. Maybe this is the start of a new era of love and harmony between us and the Insolvency Service??