Statutory deadlines, progress reports, and some wording for notices about physical meetings

If there can be a silver lining in such dark times, ours is that the queries that we receive from clients allow us to produce more relevant Blog articles. With a lot of people jumping on the email/blog update bandwagon since we started doing it in 2005, we’ve tended to reduce our output and only publish articles when we thought we had something useful to say. We are trying to do our bit to keep you informed as things change, so if you don’t follow us by email already, you should use the box on the right of the page to do so.

Today we have already dealt with queries about compliance with statutory deadlines and the approach to take with progress reports. We have also developed some wording which we think you could use in all decision procedure notices while the Government is advising against personal contact. We wanted to share our thoughts with you:

Statutory deadlines

With the situation changing daily and Government advice becoming more restrictive, there will inevitably be compromises to make. We were asked to comment on possible areas for temporary legislation yesterday, before the PM’s announcement, and we considered time limits within that. In general terms, our view was that shorter time limits and deadlines should be relaxed, but that longer ones should still stand, albeit with some necessary flexibility in the regulatory enforcement. So, we suggested that requiring people to react to an objection to a deemed consent decision within 3 working days was too onerous, but we felt that the 8 weeks maximum to issue ADM proposals did not need changing. Hopefully, any changes that the Insolvency Service announce will be both done quickly and be practical in assisting IPs.

Progress reports

Dealing specifically with progress reports, bearing in mind that the deadline in most case types is 2 months from the anniversary, whether or not any delay is reasonable will depend on a number of factors: what you have done about planning for restrictions to date; the steps you put in place to deal with it all going forward; the length of any delay; and the duration and severity of any restrictions. We have worked through a few issues to give you some idea of how they might be viewed.

Planning:

If you planned for some sort of lockdown and anticipated needing to work remotely for some time, then you should already have the IT and communications set up to produce new reports without delay, although you may not immediately have access to all of the physical records that you might need to do a perfect report (see comments about report content below) and may have to take a fairly robust approach to “delivery” of the reports (see the comments about delivery below). In those circumstances, if despite the steps taken below you still miss the odd deadline by a few days, you would probably not be criticised, as long as it was clearly connected to Covid-19, was explained in a detailed file note prepared at the time, and was rectified as soon as possible after the worst of the restrictions is over. If, however, you have not made any plans and are now contemplating widespread defaults for extended periods, then that would attract regulatory criticism and could potentially lead to penalties.

Report content:

Even if you did your planning, you may feel that you need access to physical files to complete reports. Our view is that in these exceptional times you are less likely to be criticised if you have taken reasonable steps to comply. So, if you have enough IT file notes, your time records, and a copy of the last annual report, you would probably be in a position to produce a report, but it might be an idea to add something like the following wording to any covering letter:

“This report has been produced during the Covid-19 restrictions. As a result, we had limited access to our physical case files and had to produce this from incomplete records on our IT system. We have taken every reasonable step to ensure that the information is accurate, but if anything is incorrect or incomplete, we will provide an explanation and corrected information in the next progress report.”

There may be the odd case where you really do not have enough information to produce a meaningful report, even with that disclaimer at the start. In those cases, if you can, arrange a trip to the office to collect the documents, or review them to obtain enough information to complete the report, as long as you are not putting anyone at unnecessary risk. If you consider that the travel involved and risks associated with it are too great, you should prepare a file note explaining the issue and issue the report as soon as you can after it is safe to return to the office. You should consider notifying creditors of the delay and the reasons for it. This should, however, be the exception and should be rectified as soon as possible.

Delivery:

The main problem with delivery tends to be postage, in that hard copies have to be collated and physically posted. In newer cases you may have given notice under rule 1.50 to say that future notices will be posted online. However, this was not issued for many older cases and you may not have taken that approach for newer cases anyway. In those cases, you can still use rule 1.49 to give notice to creditors that the report is available on a website (we recommend talking to The Creditor Gateway who host our documents if you don’t already have something set up). That would reduce your printing and collating to a single combined notice and covering letter, which should be manageable.

We also think that it would be reasonable, with a decent file note to justify it, to use email addresses where you have them, even if you are not in a position to rely on the deemed consent to email communications in the rules. You should explain why you are using email when you send it and you should make it clear that this is initially intended to be a response to the Covid-19 restrictions. However, we would also suggest including a consent form so that you could continue using email in future if it was convenient.

Summing up.

If you take a broad approach and say that you cannot do reports, so that a lot of deadlines are missed by weeks, rather than days, you will be criticised and could face regulatory penalties. However, if you take reasonable steps to try and issue qualified reports, using email and websites to avoid the problems caused by using post, with just a few reports missing deadlines, and even then generally by only a day or two, we are sure that you will not be criticised because of the unique circumstances. In all likelihood, you will be able to do most of your reports, but you may be pushing the limits of any regulatory forbearance in the odd case. In those cases, whether you face any action will probably depend on the circumstances at the time and the quality of your file note. A clearly argued justification, specific to that particular case, may be enough in the current crisis.

Requests for physical meetings - Standard wording

As we said in our first Blog post, before the current set of restrictions were imposed, we think that you can comply with the technical requirements in respect of physical meetings, but make adjustments in the interests of public health and the current government guidance. However, we have now updated that guidance slightly, to reflect the latest Government statement and we have developed some standard wording to include in your notices.

To qualify as a physical meeting, there must be a venue, time and date where attendees can be physically present together. Until last night’s announcement, with suitable precautions around hand-washing, distancing, etc. it might have been possible for a small meeting to be held at your offices, but that is no longer possible, at least for the next three weeks, and probably longer. Accordingly, you should make it clear to any creditors requesting a meeting that although you have to comply with the rules and hold a physical meeting, it is necessary from a public health aspect for everyone to attend remotely. Effectively, you will be turning the physical meeting into a virtual meeting for everyone except the IP or the director, depending on where the venue of the meeting is. It may be worth adding something along the following lines to your covering letters now:

“In these exceptional times, the insolvency profession is trying to operate within a legal and regulatory framework that was not designed with Covid-19 restrictions in mind. We believe that the Government is considering temporary legislation to relax some requirements, but until those changes are made, we must take some steps in the interests of public health and the safety of our clients and stakeholders. As a result, if anyone objects to a deemed consent procedure to appoint a liquidator or requests a physical meeting instead of a virtual meeting, we will not be able to comply fully with the statutory requirement to convene a physical meeting. We will be able to convene a meeting for a place, date, and time that complies with the legislation, although some time limits may have to be amended to allow for difficulties in drafting and delivering notices under the restrictions. However, nobody will be able to physically attend the meetings, other than the insolvency practitioner acting for the convener, or the convener, depending on the venue used for the meeting, and everyone else will only be able to attend remotely. We trust that you will understand that these steps are necessary while the current restrictions are in force and we would request that, if you are thinking of requesting a physical meeting, you email or telephone us using the contact details below to discuss any concerns you have and see if an alternative solution can be found to avoid the need for a physical meeting.”

You could conduct the physical meeting from your offices with the director and creditors attending remotely. Clearly, that flies in the face of the section 99 requirement for the director to attend, but in the present circumstances, it is difficult to imagine a situation where it would be in the public interest to take action about it and we think that rule 12.64 would give the court room to validate an appointment made under such circumstances if challenged.

Similarly, if you hold the meeting at the director’s house, we do not think that it would be in anyone’s interest to take legal or regulatory action if you took reasonable steps to complete your duties remotely.

You may receive some resistance from the objecting creditor if they have been set up by another IP who wants to see if the job is worth taking off you. If that is the case, start by directing them to our Blog, then ask them to be reasonable and go with the adapted format. They should already have the SA, but if they have specific concerns, try to deal with them over the phone so that when the meeting is held, any copy documents have already been exchanged and everyone knows what is going to happen, as far as possible. If you have enough votes to retain the case, it is better to get that disclosed now and avoid them disputing your appointment later on technical grounds, just because they feel that they have been treated poorly. Remember that they, and any IP they have instructed, are probably feeling just as discombobulated as the rest of us at the moment.