The Coronavirus (Scotland) Act 2020 and restructuring and insolvency practice in Scotland

The Coronavirus (Scotland) Act 2020 and restructuring and insolvency practice in Scotland

Steven Wood, insolvency practice support specialist at Institute of Chartered Accountants of Scotland or ICAS, introduces the Coronavirus (Scotland) Act 2020 (C(S)A 2020) that has been passed in light of the ongoing pandemic. and highlights the impact of this legislation on restructuring and insolvency practice in Scotland during its period of operation.

What is the Coronavirus (Scotland) Act 2020?

The purpose of (C(S)A 2020) is to respond to the emergency caused by the coronavirus (COVID-19) pandemic. C(S)A 2020 complements and supplements the Coronavirus Act 2020, passed by the UK Parliament on 25 March 2020, and which the Scottish Parliament gave its consent to on 24 March 2020.

When did it come into force and how long will it be in operation?

The bill for C(S)A 2020 was passed by the Scottish Parliament on 1 April 2020 and the act came into force on 7 April 2020, after receiving royal assent.

C(S)A 2020, s 12 provides for the main provisions of the C(S)A 2020 to expire on 30 September 2020, unless the Scottish Parliament passes regulations providing for its effect to continue until 31 March 2021. If the Scottish Parliament does pass such regulations, it may then pass regulations allowing one further, final extension, until 30 September 2021, at which point any remaining provisions in the C(S)A 2020 will expire.

The Scottish Ministers also have the power, by regulations, to suspend any of the main provisions of the C(S)A 2020, to revive the effect of any suspended part and to cause any of the main provisions of the C(S)A 2020 to expire earlier than the schedule set out. This power allows any provision which is no longer, in the view of the Scottish Ministers, appropriate or proportionate, to be removed entirely or to be suspended if it may become necessary to use again.

What changes does C(S)A 2020 introduce?

Broadly, C(S)A 2020 takes the following measures:

  • it adjusts the law on evictions to protect those renting their homes during the coronavirus outbreak
  • it adjusts criminal procedure, and other aspects of the justice system, to ensure that essential justice business can continue to be disposed of throughout the coronavirus outbreak, and
  • it makes a range of provisions designed to ensure that business and public services can continue to operate effectively during a period where controls on movements have been imposed, and when pressures on public services are acute

What are the measures that will specifically impact the restructuring and insolvency profession?

Moratorium on diligence

The main change directly impacting the restructuring and insolvency profession is brought about by C(S)A 2020, s 3. This section introduces C(S)A 2020, Sch 2, which provides for a temporary extension of moratoriums on diligence.

 

The Accountant in Bankruptcy advises that this change is being made to:


  • reduce stress and protect the mental health of those worried about the prospect of creditor enforcement action during a time of increased uncertainty
  • give additional time for options to be considered properly before potentially irreversible decisions are taken, particularly as advisers may find it difficult to see the volume of clients that need help, and;
  • protect individuals whose problem debt is a direct result of coronavirus, and whose finances will normalise after the pandemic without the need for a formal debt solution

The moratorium is available to individuals, or certain legal persons who are permitted to apply for sequestration under the terms of the Bankruptcy (Scotland) Act 2016 (B(S)A 2016), including trusts and partnerships.

C(S)A 2020, Sch 2, para 4(a) increases the length of the moratorium against diligence created by B(S)A 2016, ss 195–198, from six weeks to a period of six months, for moratoria established during the period covered by the emergency legislation.

Additionally, C(S)A 2020, Sch 2, paras two and three remove the prohibition against an individual benefitting from more than one moratorium in any 12-month period, so that those who have recently had a moratorium are not excluded from the effect of the changes.

Electronic signatures

C(S)A 2020, s 5 introduces C(S)A 2020, Sch 4, which includes provisions surrounding courts and tribunals conducting business by electronic means.

This provides for electronic signatures to fulfil the requirement for certain documents to be signed and allows for documents to be transmitted electronically. This will only impact insolvency practitioners to the extent that the courts are prepared to deal with insolvency-related matters. At the time of writing several Scottish courts are known to be essentially deeming insolvency business as non-urgent.

The description of ‘court’ within the C(S)A 2020 extends to any office-holder of a court. As the Accountant in Bankruptcy falls within that description, C(S)A 2020, Sch 4 will allow it to accept debtor bankruptcy application forms submitted with electronic signatures. The signature must be created by the individual and can be done through use of various software solutions or by the applicant emailing their money adviser/proposed trustee with a simple statement averring that the relevant form is being submitted electronically with their consent. The statement must include the applicant’s name, address and date of birth. It should be uploaded to the Accountant in Bankruptcy’s case management system along with the relevant form(s).

Commercial leases and evictions

Insolvency practitioners dealing with landlord insolvencies or debtor evictions will need to be aware of the provisions of the C(S)A 2020 surrounding lease termination and dwellinghouse evictions.

Normally, a landlord must give a tenant at least 14 days’ notice before terminating a commercial lease due to non-payment of rent. C(S)A 2020, Sch 7, para 7 increases the notice period from 14 days to 14 weeks.

 

C(S)A 2020, Sch 1 also provides increased protection from eviction for private and social tenants. The minimum notice period for eviction has been increased from six weeks to six months in most cases, depending on the grounds for eviction.

Interviewed by Nick Shannon.

 

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About the author:

Zahra started working as a paralegal at LexisNexis in the Lexis®PSL Banking & Finance and Restructuring & Insolvency teams in April 2019 and moved to the Corporate team in June 2020, where she currently works as a Market Tracker Analyst. Zahra graduated with 2.1 honours in BA French and Spanish and completed the GDL at BPP University. She has undertaken voluntary work for law firms in London, Argentina and Colombia.