The challenges of consolidating the Insolvency Rules

What are the substantive proposals for change set out in the Insolvency Service’s consultation into the modernisation of the Insolvency Rules?

Original news

The Insolvency Rules 1986 (SI 1986/1925) (the Rules) have been described by the House of Lords as an ‘impenetrable thicket’ owing to extensive amendments, additions and deletions of text. The government is therefore proposing to consolidate and replace the Rules, modernising them and reordering their structure on clearer and more logical lines. A consultation on the proposals has been launched by the Insolvency Service (IS), and closes on 24 January 2014.

What is the background to this consultation?

Since 1986, the Rules have been heavily amended by numerous amending statutory instruments to reflect changes in primary legislation, case law and policy. Rather than simply consolidating the existing Rules and their many amendments, the IS intends ‘to modernise and recast the Rules; taking the opportunity to reorder the whole structure on more logical and clear lines’.

The draft Rules also contain some proposed technical changes on which comments are invited. Some of these arise directly from the government’s Red Tape Challenge initiative (the insolvency proposals in relation to which were announced in July 2013). The document specifically states that not all of the proposed Red Tape Challenge measures have been fully worked through in the draft rules, and that therefore that draft should be regarded as work in progress. The IS acknowledges the draft contains some inconsistencies across the different insolvency procedures and it is continuing to address them.

The draft Rules also contain some other proposed technical changes, many of which were suggested by stakeholders before the launch of the Red Tape Challenge.

What is the structure of the new Rules?

The consultation document points out that in the existing Rules, those rules applicable to the different types of liquidation (ie members’ voluntary, creditors’ voluntary and winding up by the court) are amalgamated and, in the main, those which apply in the particular type of liquidation are designated