The Insolvency Rules 1986 (“IR 1986”) are to be replaced in their entirety by the Insolvency Rules 2015 (“IR 2015”).
The Insolvency Service has been running a long-standing ‘modernisation’ project to consolidate the 23 amending instruments to IR 1986 and provide a number of substantive amendments to existing insolvency law and practice.
In July 2013, the Insolvency Service published a detailed consultation entitled “Red Tape Challenge – changes to insolvency law to reduce unnecessary regulation and simplify procedures”. On 26 September 2013, the Insolvency Service published a further consultation document regarding the proposals to consolidate and replace IR 1986, along with a working draft of the IR 2015. The consultation closed in January 2014. On 17 February 2014, the Insolvency Service published a further consultation on strengthening the regulatory regime and fee structure for insolvency practitioners which closed on 28 March 2014. The Insolvency Service are currently analysing the feedback from these consultations.
After nearly 30 years of IR 1986, if the draft IR 2015 are anything to go by as well as getting to grips with a number of changes, the insolvency profession will need to familiarise themselves with the substantially different order to that currently contained in IR 1986. The final draft of the new rules is not being published before October 2014, however proposals consider:
- Allowing IPs to communicate with creditors electronically, instead of by letters;
- Abolishing final creditors’ meeting in liquidation and bankruptcy;
- Ensuring personal service of winding up petitions;
- Reducing record keeping requirements by IPs which are only used for internal purposes;
- Simplifying the process of reporting director misconduct to make the process quicker by introducing electronic forms to ensure timely action;
- Removing the requirements for office holders to obtain court orders for certain actions; (for example administrators will be able to obtain creditor approval for extensions up to 12 months);
- Allowing office-holders to distribute on low value claims without creditors first completing a proof of debt; and
- Reducing costs by removing the requirement to pay out small dividends and instead using the money for the winder benefit of creditors.
The draft IR 2015 also aim to reduce the risk of an invalid out of court appointment of administrators made by directors following the issues raised in the cases of Minmar and subsequently in Re Virtualpurple and Msaada by clarifying that notice requirements only apply where a notice of intention to appoint has been given to a qualifying floating charge holder.
Business Minister Jenny Willott stated that the measures will reduce the cost of insolvency procedures and benefit creditors by £30 million a year.
Whilst it unclear exactly when IR 2015 will come into force, for now, an overhaul aiming to simplify and clarify must be welcomed.