The New Insolvency Rules – one year on

The New Insolvency Rules came into force in April 2017 with the intention of reducing the burden of red tape as well as modernising and consolidating the existing rules. The main changes for creditors related to meetings of creditors – or the lack thereof - and the introduction of a deemed consent procedure. Claims under £1,000 were deemed approved for dividend purposes, without the need for a proof of debt to be submitted and finally, email and web communication were encouraged, giving creditors the ability to opt out of certain reporting. 

A year on, and having guided various creditors through the new processes, the feedback has been fairly uniform in terms of the positives and negatives. Creditors have welcomed the reduction in the amount of paperwork they receive, as the administration time tended to outweigh the benefits. Creditors can now choose to monitor those cases that are important to them via online portal systems, safe in the knowledge that any dividend information will still arrive by post.

Removing the onus of submitting a proof of debt for claims under £1,000 would appear to save time and costs for all parties, however the level of claims that fall into this bracket is often minimal. Some creditors have said they still prefer to submit the forms rather than review the figures provided by the director. In most cases the figures are dependent on the quality of the books and records provided, and can often be incorrect. For those companies that have frequent and often large debts, many have said that claims under £1,000 have now ceased to be administered at all due to the relative size of any dividend received.

The biggest change which remains a talking point is the implementation of the deemed consent procedure. Initial views were that it was a positive change – why convene a meeting when more often than not, creditors do not attend? Issues have arisen when creditors want to engage with the process and have the opportunity to question the director or appoint their choice of IP. This can be due to the size of the debt or the events leading up to insolvency. One creditor’s claim is rarely sufficient (10%) to request that a meeting is convened, so they must now wait until the full list of creditors is available to try to procure the additional support required. The list is sometimes only available on the day before the deadline and many don’t have the resources to undertake the task of liaising with other creditors and amalgamating the relevant forms. Some IPs have been understanding of the issue and are happy to accept and relay any questions to the director, but this is a delayed process and lacks the immediacy and subsequent transparency that a physical meeting with the director present often brings.

On the other hand, virtual meetings have been very well received. Virtual meetings take place instead of the deemed consent procedure and allow to creditors to vote and engage in a similar way to physical meetings.  Travel time and costs can sometimes be a deterrent to attend in person so having the facility to dial in from home or at work has resulted in an increase in ‘attendance’. IPs are always keen to hear from creditors at this stage as it often unearths issues that can form part of their statutory investigations.

Overall, creditors seem to be welcoming of the changes which have prompted them to become more vocal and involved with the procedures. Our Creditor Services team has certainly seen an increase in enquiries and are keen to remove the burden of convening meetings from creditors themselves. Over the past 10 months we have successfully convened 25 meetings for our clients, as well as providing a representative to attend on their behalf. If you have any queries or cases of this nature, please contact a member of the team for further advice.


 

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