New Insolvency Rules laid before Parliament

New Insolvency Rules laid before Parliament

The Insolvency (England and Wales) Rules 2016 have been laid before Parliament, and will come into force on 6 April 2017—subject to some transitional provisions—on which date the Insolvency Rules 1986 (IR 1986) and other secondary legislation that has subsequently amended them will be repealed. As the biggest change in insolvency law for 30 years, there will be relief that the new insolvency rules have finally been laid before Parliament, but also apprehension that insolvency professionals now have little under six months to digest the new insolvency rules, which contain a number of changes to procedures and processes, and be ready for their commencement.

Background to the new insolvency rules

As part of the government's Red Tape Challenge in 2011, the IS was tasked with reviewing the insolvency process in England and Wales in order to try to streamline the process and cut costs by reducing unnecessary regulation, therefore with the ultimate goal of increasing returns to creditors.

Note that Northern Ireland and Scotland operate under different rules and so do not fall under this particular reform process.

The first draft of the new rules was published in September 2013 for consultation, and invited stakeholder responses on the draft by 24 January 2014. The government stated that its aim for the new rules was to 'modernise and recast them…taking the opportunity to re-order the whole structure on more logical and clear lines.'

In July 2015 the IS published a news story on it's website stating that, on 20 July 2015, it had met with members of the Insolvency Rules Committee to discuss the draft new rules. At the same time the IS published a further draft of the new rules and an explanatory note of the policy changes, with a statement that the new rules would be expected to be made in spring 2016, with a commencement date of 1 October 2016. However, there have been delays, and at the Institute of Chartered Accountants in England and Wales’ Insolvency and Restructuring Group’s roadshow on 22 September 2016, the IS said that it was aiming to lay the new insolvency rules before Parliament week commencing 10 October 2016, with a commencement date of 6 April 2017, subject to Ministerial approval (see blog post: Timing announcement for the Insolvency Rules 2016).

This has now happened and the Insolvency (England and Wales) Rules 2016, SI 2016/1024 were laid before Parliament on 25 October 2016.

What changes are contained in the new insolvency rules?

The purpose of the new insolvency rules is to:

  • consolidate the amendments made to IR 1986 since they came into force
  • change the structure of the insolvency rules so as to make it more logical
  • use modern and gender neutral language
  • deal with changes to insolvency law and practice brought about by the Deregulation Act 2015 and Small Business, Enterprise and Employment Act 2015

The changes include:

  • removing creditors' meetings as the default of all decision making (subject to some exceptions) and the creation of new decision making processes
  • giving creditors the chance to opt-out of receiving communications from an insolvency practitioner in relation to a particular case, other than communications relating to dividends
  • requiring creditors to lodge a proof of debt in creditors' voluntary liquidations, which was already required in other insolvency processes
  • the stripping out and streamlining of procedures and processes common to all insolvency processes, and setting these out in separate parts of the new insolvency rules
  • the ability of insolvency practitioners to use websites and electronic mail to communicate with creditors in certain circumstances

What are we doing at Lexis®PSL in relation to the new insolvency rules?

Given the extent and impact of the new insolvency rules, we will undertake a wide range of work over the coming weeks and months, including:

  • updating our Annotated Guide to the New Insolvency Rules, written by Dr John Tribe and Susan Morgan, available in both Lexis®PSL Restructuring & Insolvency and Lexis®Library. The current version of this resource compares the July 2015 version of the draft new insolvency rules with IR 1986 in force at that time. We will confirm when this resource has been updated
  • publishing News Analysis articles between now and April 2017 highlighting the major changes of the new insolvency rules to you
  • prior to the commencement of the new insolvency rules, reviewing and updating where appropriate our Lexis®PSL Restructuring & Insolvency core content (eg Practice Notes, Checklists, Precedents)
  • publishing new Practice Notes examining individual and specific areas of change

Further Reading

If you are a LexisPSL Restructuring and Insolvency subscriber, click the links below for further information:

Small Business, Enterprise and Employment Act 2015—impact on insolvency

The Deregulation Act 2015

Not a subscriber? Find out more about how LexisPSL can help you and click here for a free trial of LexisPSL Restructuring and Insolvency.

First published on LexisPSL Restructuring and Insolvency

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.