What does the crystal ball show regarding developments in the UK restructuring world in 2015?
1. Who will prosper: insolvency litigators or rogue directors?
The exemption to the Jackson reforms for insolvency proceedings in the UK is due to expire on 1 April 2015. This will mean that conditional fee agreement (“CFA”) success fees and ATE insurance premiums will no longer be recoverable from the defendant in proceedings brought by insolvency practitioners and will have to be paid out of the proceeds of the litigation. This is likely to have the effect of deterring insolvency practitioners from commencing proceedings and there is concern that errant directors will not be brought to justice. An independent report carried out for R3 estimated that the Jackson reforms will cost creditors £160 million per year.
R3 and other trade bodies are currently lobbying Parliament to make the exemption permanent. If not, 2015 will be a good year for rogue directors but not for insolvency practitioners pursuing them or creditors of insolvent companies.
2. Interest Rate Hedging Products (“IRHP’s”) and LIBOR fixing: More bad news for the Banks?
To date the few IRHP mis-selling claims that have found their way to Court have been decided in favour of the Banks.
However, one area which has not yet been determined is the claim that hedging products sold included an implied representation that LIBOR was not manipulated, which has subsequently transpired to be the case.
The issue nearly got to Court in April, but the claim was settled just days before the trial. However, there are at least two other cases currently before the Courts on the same issue. Will the issue be heard or will the Banks do everything they can to avoid a precedent?
3. Will creditor meetings become a thing of the past?
In the Small Business, Enterprise and Employment Bill the Government is suggesting abolishing physical creditors meetings unless they are requested by 10% of creditors. The Government’s goal is to increase creditor engagement by using other forms of technology to communicate. However, opponents have said that this will exclude creditors from the insolvency process and especially smaller businesses without broadband access.
4. Will we be using new Insolvency Rules 2015?
The Insolvency Rules 1986 have been amended 23 times since they came into force, which has left them unwieldy and difficult to use. They are currently being overhauled and the new, updated and integrated version of the rules is meant to be modern, clear and user friendly.
We are waiting for the final draft to be published. Once published, we can expect numerous training sessions and workshops to get to grips with them. We might have a bit more time though as whilst the current draft are called the Insolvency Rules 2015, they might not actually come into force until 2016.
5. Will pre-packs need independent “pool” approval?
The Graham Report was published this summer and made a number of recommendations to reform pre-packs which the Government has accepted. One of Graham’s recommendations is to form a pool of business people to consider proposed pre-pack transactions where the sale is to a connected party before that sale is concluded. The closing date for applications for members of this pool is 12 January 2015.
6. Insolvencies are at their lowest levels since 2007 but will insolvencies increase in 2015?
In early 2014 commentators suggested it was likely interest rates would rise in Q1 2015. However, analysts now say a rate rise is unlikely and with a general election due to take place on 7 May 2015, it is difficult to see anything changing to rock the boat before then.