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Modernised Insolvency is arriving in April 2017 – are you ready?


The Insolvency (England and Wales) Rules 2016 will come into force on 6 April 2017.  The new rules 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.

The new rules replace the old (including all amendments) in their entirety. The Insolvency Service will be publishing guidance by way of frequently asked questions on their website.

The key changes

Electronic communication

Written consent for use of electronic communication (such as email) between the insolvency practitioners (“IP”) and a creditor will not be required in all circumstances.  From April, where a debtor and 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 for website publication of future documents relating to the insolvency in 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 exclusions).

Changes to creditors’ meetings

Physical meetings will no longer be the default for creditors 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 receiving correspondence on cases (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

The 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. 

Replacement of prescribed forms

Prescribed statutory forms will be replaced with specified content for notices and documents. 

Be prepared!

Between now and April 2017, IPs will need to familiarise themselves with the new rules.  They will also need to look at their systems and consider what changes are needed to bring their business in line with the new rules – including how to ensure confidentiality and security in the use of virtual meetings, electronic voting and electronic communications.

 Disclaimer: This article is not intended to constitute legal advice.  For legal advice in connection with the above, please contact us directly.

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