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The Insolvency (England and Wales) Rules 2016, SI 2016/1024 (IR 2016) came into force on 6 April 2017 (subject to transitional provisions) heralding the biggest single change to insolvency law in 30 years. But will the IR 2016 apply to all insolvency regimes? James Moore, senior associate, and Helen Kavanagh, professional support lawyer, of Squire Patton Boggs consider the position.
No. In the rush to ensure compliance with the new rules, it should not be overlooked that the new rules are not applicable (or only in a modified form) to all insolvency regimes.
The following existing special regimes will not be affected by the IR 2016. Other changes were also introduced on or around 6 April 2017, which are also highlighted.
The Insolvency (England and Wales) Rules 2016 (Consequential Amendments and Savings) Rules 2017, SI 2017/369 state that the Insolvency Rules 1986, SI 1986/1925 (IR 1986) (pre-amendment) continue to have effect insofar as they apply to proceedings under the following instruments:
For regimes under the above, the IR 1986 (together with the prescribed forms) remain in place for the time being.
While it has not been set out in a Statutory Instrument, caution should be applied to all special insolvency regimes governed by HM Treasury, primarily those dealing with the insolvency of financial institutions. These regimes have generally evolved their own sets of rules and regulations, which have to date applied the IR 1986 with amendments. Most of these special regime rules have not yet been varied to incorporate references to the new rules.
The Deregulation Act 2015, Small Business, Enterprise and Employment Act 2015 and Insolvency (Amendment) Act (Northern Ireland) 2016 (Consequential Amendments and Transitional Provisions) Regulations 2017, SI 2017/400 (together the Regulations) come into force on 7 April 2017, the day after the IR 2016. Collectively the Regulations make amendments to ensure that the reforms to general corporate insolvency are reflected in HM Treasury’s modified special insolvency regimes, where general insolvency law is applied to financial institutions.
These Regulations amend the following primary legislation:
The Regulations also amend some subordinate legislation, including:
Where an insolvency would fall under the above, or any other special insolvency regime, its interaction with the IR 2016 should be considered carefully and checked to assess exactly how the IR 2016 rules are to be applied.
While considering the interaction between the IR 2016 and special insolvency regimes, and being alive to the fact that the IR 2016 understandably grabbed the headlines on 6 April 2017, it is important to remember (in the world of investment banks at least) that this is not the only important rule change that came into force on that day.
The Investment Bank Special Administration Regulations 2011, SI 2011/245 (SARs) were introduced in response to the shortcomings of the existing insolvency legislation when dealing with the collapse of Lehman Brothers. The SARs were subsequently reviewed by Peter Bloxham in his report which was published in January 2014 and reviewed by way of a Government consultation. HM Treasury, which has the power to vary the existing regulations dealing with investment banks, has now published The Investment Bank (Amendment of Definition) and Special Administration (Amendment) Regulations 2017, SI 2017/443 which came into force on 6 April 2017 to coincide with the introduction of the IR 2016.
The highlights to the changes are:
Attention should naturally be on the new rules that came into force on 6 April 2017. However, do keep in mind—particularly in relation to the special administration regimes—that other changes also came and will come into force (now and in the future with an ongoing consultation over revisions to the CASS Rules) and it should not be assumed that the IR 2016 will be applicable to such regimes in exactly the same way as they would be to a non-special procedure governed by the Insolvency Act 1986.
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
This article first appeared on www.esquireglobalcrossings.com
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A summary of the key changes in the Insolvency (England and Wales) Rules 2016
The Insolvency (England and Wales) Rules 2016—overview
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