This article provides an essential update for insolvency practitioners on insolvency changes in 2015 and the proposed changes in 2016.
The Small Business, Enterprise and Employment Act 2015
Part 10 of the Small Business, Enterprise and Employment Act 2015 ( “SBEEA”) (i) introduced changes to the Insolvency Act 1986 (“IA 86”) which came into force on 26 May and (ii) sets out other changes which will be brought into force by statutory instruments which are yet to be made. Little has been made of the changes now in force but both Liquidators and Trustees in Bankruptcy will be pleased to hear that SBEEA has removed the need for sanction (which was previously needed in respect of a liquidator exercising powers set out in Part I of Schedule 4 to IA 86 and a trustee exercising powers set out in Part I of Schedule 5 to IA 86).
Administrators can now extend the period of administration by one year (as opposed to the previous 6 month extension) with consent. Administrators can also make secured, preferential and prescribed part distributions with the consequent removal of the ability to exit an administration into Creditors Voluntary Liquidation solely for the purposes of making a prescribed part distribution.
SBEEA also provides a reserve power for the Secretary of State to provide regulations within the next 5 years which prohibit pre-packs to connected parties.
No end to the CFA
At the time our last Insolvency update went to print it was intended by the Government that from 1 April 2015, the insolvency profession would no longer be under the current exemption to the reforms to litigation funding which were introduced in April 2013 by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (“LASPO”). Shortly thereafter, the Government confirmed that they would delay commencing sections 44 and 46 of LASPO for insolvency proceedings for the time being. Accordingly, conditional fee agreements in insolvency proceedings will continue to operate on a pre-LASPO basis with any success fees and after the event insurance premiums remaining recoverable from the losing party.
Change to Bankruptcy Limit
The minimum level of debt for which a creditor can commence bankruptcy proceedings is set to increase from £750 to £5,000 for petitions presented on or after 1st October 2015 as provided for by the Insolvency Act 1986 (Amendment) Order 2015.
The draft Insolvency Rules 2016
On 20 July 2015, the Insolvency Service met with members of the Insolvency Rules Committee to discuss the draft Insolvency Rules 2016 (“IR 2016”) and it looks likely that IR 2016 will become effective in October 2016.
IR 2016 are intended to (i) consolidate the existing rules and their amendments into a single set of rules; (ii) modernise and simplify the language and (iii) reduce the burden of red tape.
Intended changes include:
- Removing meetings of creditors as the default position in insolvencies;
- The abolition of final meetings;
- The ability for creditors to opt out of further correspondence;
- Allowing an office-holder to pay a dividend in respect of a debt of less than £1,000 without the need for the creditor to submit a formal claim; and
- All applications for bankruptcy on the petition of the debtor will be submitted to an Adjudicator (who will be a person appointed to that role by the Secretary of State).
Whilst simplification and consolidation of legislation is always welcomed, there looks set to be a number of changes to get to grips with.