Introduction

At last! After three years in the making the Insolvency (England and Wales) Rules 2016 have finally arrived and will come into force on 6 April 2017. The new rules are a consolidated, restructured, modernised take on the 1986 rules which have been amended 28 times since they came into force. The new rules also take account of changes made by the Deregulation Act 2015 and the Small Business, Enterprise and Employment Act 2015, removing red tape and abolishing certain physical meetings and paper forms. Whilst quite an overhaul, the new rules are supported by material to help you navigate the "modernised" insolvency world.

Finding your way

The new rules replace the old (and all amendments) in their entirety and have been wholly restructured. However, the new rules helpfully come with non-legislative notes to prompt and guide readers. They also come with a derivations table which lets you track through old rules to their new rule equivalents. The Insolvency Service will also be publishing guidance by way of frequently asked questions on their website.

The new rules introduce some “common parts” being procedural matters that are common to each form of liquidation: creditors voluntary, members voluntary and compulsory. These common parts avoid unnecessary repetition and inconsistency, and unify the procedural approach.

The key changes

Aside from the introduction of gender neutral wording, use of active voice and replacing references to "shall" with "must" (amongst others), there are some significant changes as follows:

Electronic communication

Written consent for use of electronic communication (such as email) between the insolvency practitioners ("IPs") and a creditor will not be required in all circumstances. From April, where a debtor and a creditor customarily corresponded electronically pre-insolvency, the IPs may continue to correspond with such creditors in the same manner.

Use of websites

Court orders will no longer be needed to publish all future documents relating to the insolvency on a website. IPs will be able to send a notice at the outset informing creditors that all future documents will be made available online (although there are some excepted documents).

Changes to creditors' meeting

Under the new rules, physical meetings will no longer be the default for creditor decision making and the rules specify alternative types of decision-making processes (including deemed consent and qualifying decision procedures). IPs will only be able to call physical meetings if requested by the creditors when asked to make a decision (subject to a few exceptions) and the use of virtual meetings is therefore encouraged. This is aimed at reducing costs and increasing returns to creditors.

Abolition of final meetings

Final meetings of creditors will be abolished in bankruptcy and all types of liquidation.

Opting out of correspondence

Creditors may opt out from correspondence on the case (although notices of intended dividend are excluded) and creditors can also opt back into correspondence at any time.

Dividends on small debts

IPs will be able to pay dividends to creditors without a creditor having to submit a proof of debt but only where the debt is less than £1,000. However, if the creditor wishes to be involved in the decision making process, it will still need to prove its debt.

Appointment of Official Receiver as trustee in bankruptcy

An official receiver will automatically be appointed as the trustee in bankruptcy upon the making of an order, as opposed to being appointed as receiver and manager pending appointment of a trustee. This will remove the delay between the making of the bankruptcy order and the automatic vesting of property in a trustee.

Replacement of prescribed forms

Prescribed statutory forms will be replaced with specified content for notices and documents. This specified content is different from the information previously included in the statutory forms and even goes as far as to specify the order in which the content must appear.

What next?

Between now and April 2017, IPs will need to get familiar with the new rules and how they work. Practitioners will also need to look at their systems and technologies and consider what changes are needed to bring their businesses in line with the new rules – including how to ensure confidentiality and security in the use of virtual meetings, electronic voting and electronic communications.