Revised insolvency practice direction now in force

What is contained in the new insolvency practice direction?

The practice direction is set out in six parts:

1. Part one: general provisions
2. Part two: company insolvency
3. Part three: personal insolvency
4. Part four: Financial Markets and Insolvency (Settlement Finality) Regulations 1999—required information
5. Part five: appeals
6. Part six: applications relating to the remuneration of appointees

What are the changes to the insolvency practice direction?

Part one: general provisions

• the definitions of 'Registrar' and 'Court' have been updated to include county court hearing centres—the definition for the 'Royal Courts of Justice' has also been updated to provide the Rolls Building address
• the coming into force date has been amended to be 29 July 2014 (para 2.1) and includes the fact that the practice direction does not affect the Practice Direction relating to contributories’ winding up petitions (CPR PD 49B—Order under section 127 Insolvency Act 1986)
• applications for an injunction before a judge have been updated to clarify that this relates to the court's inherent jurisdiction or pursuant to the Senior Courts Act 1981, s 37 or s the County Courts Act 1984, s 38—this does not apply to any 'order' made but to insolvent companies (para 3.2(3)) and insolvent individuals (para 3.3(2))
• the court documents for insolvency proceedings under Parts I–VII have been amended to reflect the new County Court
• when dealing with service of documents, practitioners attention is now drawn to the Insolvency Rules 1986, SI 1986/1925, r 12A.16(2)
• apart from documents treated as a claim forms, under rule 12A.16(3)(b), any other document which is deemed to be served on the date set out in CPR 6.26 is now stated to include 'any document which is treated as a claim form pursuant to rule 12A.16(3)(a) but which is not a document of a type specified in rule 12A.16(2))'
• the practice direction makes it clear that the provisions in CPR 6 do not apply when serving any of the following documents in the jurisdiction:
  • a winding-up petition
  • a bankruptcy petition
  • any document relating to such a petition, or
  • any administration, winding-up or bankruptcy order
• applications, being treated as a claim form under rule 12A.16(3), will no longer require permission of the court to serve in the jurisdiction
  • when the application is by an office holder appointed in insolvency proceedings in respect of an individual—previously this provision only applied if a company but it now applies to both an individual and a company (para 6.5(1))
  • a member state liquidator is to be defined as set out in the Regulation on Insolvency Proceedings (EC) 1346/2000, art 2 (para 6.5(2))

Part two: company insolvency

The provisions for the contents of a winding up petition have been amended. All the provisions are now required unless 'by reason of the nature of the company or its place of incorporation the information cannot be stated'. If that is the case then there is a requirement to provide as 'much similar information' as possible. The actual contents required are in para 11.2 and the amendments are:

• the registered number(s) of the company
• the legislation under which the company was incorporated—this provision previously stipulated the Companies Act or Acts
• when dealing with an overseas company, the address of any establishment registered under the Companies Act or Acts
• the practice direction now differentiates between a company incorporated under the Companies Act 2006 (CA 2006) and companies incorporated under any of the Companies Act prior to that Act
• companies incorporated under CA 2006 (para 11.2(6)(b))—there is now a requirement to make one of the following statements:
  • confirmation that its objects are unrestricted pursuant to CA 2006, s 31(1), or
  • confirmation that its objects are restricted by its articles of association and brief details of such restrictions
• in relation to companies incorporated under other Companies Acts (paras 11.2(5) and 11(6)(a)), there is now an alternative requirement to the need for 'a statement of the nominal capital of the company, the manner in which its shares are divided up and the amount of the capital paid up or credited as paid up'—that alternative is 'In the case of any other companies, a statement of the known issued share capital of the company, the manner in which its shares are divided up and the amount of the capital paid up or credited as paid up'
• when dealing with a company being struck off the register the Solicitor to the Duchy of Cornwall has been added alongside the Duchy of Lancaster in relation to evidence of service required (para 11.4)
• if it is discovered that a company was struck off the register prior to a winding up order being made, the matter must be restored to the list to enable the restoration of the company—new provisions have been added which state that 'and, save where the petition has been presented by a Minister of the Crown or a government department, evidence of service on the Treasury Solicitor or the Solicitor for the Affairs of the Duchy of Lancaster or the Solicitor to the Duchy of Cornwall (as appropriate) should be filed exhibiting the bona vacantia waiver letter' (para 11.6.3)

Validation order provisions have been amended at para 11.8.5. When providing details of bank accounts you will now need to also provide the amount of the credit or debit balance on such account at the time of making the application.

Amendments to applications has been updated to include reference to county court hearing centres.

Part three: personal insolvency

In relation to personal insolvency, the points to note are:

• deemed date of service for statutory demands has been deleted—as this was the first provision, in this part, it means that all the paragraph numbers have changed
• Hague Convention country information has been changed—the address for determining whether a country is a convention country have been updated
• the statutory demand precedent has been updated to reflect the new County Court and there is now reference to the month on which the demand for payment of made—clarification is also provided for calculating the 18-day period for applying to set the demand aside; it is from 'the date of the first appearance of this advertisement'
• personal service:
  • where a creditor fails to effect personal service and a letter is written to the debtor, that letter previously had to be sent by first class prepaid post—the amendments provide an alternative, which is to leave or deliver the letter to the debtor's address (however, this must be done in such a way that the letter is reasonably likely to come to the debtor’s attention)
  • ◦the timings for the date of service for a statutory demand when providing personal service have changed—you will need to state whether the service was effected before 16.00 on Monday to Friday (previously 17.00) and at a weekend you will now need to state whether the service was effected before or after 12.00 on a Saturday (service can no longer be effected on a Sunday)
• a search must be undertaken for pending petitioners against the debtor—that search is now only required to be undertaken on the Official Search with the Chief Land Registrar in the register of pending actions (this will only catch pending petitions and not, as previously, any petition presented in the previous 18 months) (para 14.3.1)
• petition certificate—this is required at the end of the petition and has been changed (para 14.3.1)
• deposit provisions have changed to reflect the county court hearing centre (para 14.4.1)
• validation amendments are the same as the changes applied in corporate insolvency—ie that when providing details of bank accounts you will also now need to provide the amount of the credit or debit balance on such account at the time of making the application (para 14.8.4(11))
• amendments to applications has been updated to include reference to county court hearing centres (15.1(2)(a))
• orders without attendance previously contained provisions which only related to the High Court making orders for individual voluntary arrangements—this has been updated so that it simply provides for the court (para 16.1)
• applications for consent orders can now be lodged before any hearing date—the previous provision referred to any 'fixed' hearing date (para 16.6)
• persons at risk from violence are subject to specific rules—the changes mean that when such an application is made the person will be a respondent to the application even where consent is not available (para 18)

Part four: Financial markets and insolvency (Settlement finality) Regulations 1999—required information

This is a completely new section and provides the following:

'In any case in which the court is asked to make an order to which regulation 22(1) of the Financial Markets and Insolvency (Settlement Finality) Regulations 1999 (SI 1999/2979) applies, the party applying for the order must include in the petition or application a statement to that effect, identifying the system operator of the relevant designated system, the relevant designating authority,  and the email or other addresses to which the court will be required to send notice pursuant to regulation 22(1) if an order is made.

At the date of this Practice Direction, the Regulations apply where, in respect of “a participant in a designated system” (as those terms are defined in the Regulations), an order is made for administration, winding-up, bankruptcy, sequestration, bank insolvency, bank administration, building society insolvency, building society special administration or investment bank special administration. Applicants must before making the application check for any amendments to the Regulations.'

Part five: appeals

Now commences at para 20.

Minor amendments to reflect the new County Court.

The provisions now differentiate between appeals where permission to appeal was given on or before 30 September 2012 or where the appeal notice was filed on or before 30 September 2012 and permission to appeal has not yet been given (category 1 appeals) and all other appeals (category 2 appeals).

When dealing with category 1 of appeals, the relevant provisions are found in para 20.9.1 and comprise the old provisions.

When dealing with category 2 of appeals, the new provisions start at para 20.9.3. They provide as follows:

'20.9.3 In relation to all other appeals, CPR Part 52 and Practice Directions 52A, 52B and 52C and its Forms shall, as appropriate, apply to appeals in insolvency proceedings, save as provided in paragraph 19.9.4 below.

20.9.4 Paragraphs 4.3 to 4.5 of Practice Direction 52A and Section 2 and Tables A and B of Practice Direction 52B shall not apply.

20.10 For the avoidance of any doubt, references in this Part to the County Court include, in respect of decisions made before 22 April 2014, a county court.'

Part six: applications relation to the remuneration of appointees

This was previously part five. The only other change is that it commences at para 21 rather than the previous para 20 so leading to the change in paragraph numbers throughout the part.

Further Reading

11 Stone Buildings have published an article on the changes in the Inoslvency Practice Direction. This can be accessed here

Anna Jeffrey, solicitor in the Lexis®PSL Restructuring & Insolvency team.