How do the upcoming changes to insolvency rules affect creditors after April 2017?
A new set of rules is set to land on the 6th of April 2017 that will alter the direction and process of insolvency practice. This comes as an extremely welcomed change as the rules have remained relatively untouched since 1986 and the creation of the insolvency act. These changes have been carefully crafted by the government in collaboration with members of the insolvency profession, and have the mark of approval from the IRC (Insolvency Rules Committee). What can we expect from the revised set of rules? How will they affect procedures? What affect will they have on creditors and practitioners alike? Although the rules are listed in-depth in a 446-page document, the below summarises the key points:
Compulsory S.98 meetings abolished
In current practice, an insolvency meeting must be held once a liquidator has been appointed - This meeting aims to provide creditors with a detailed insight into the financial standing of the insolvent company in question. These meetings are often seen as a complete waste of time, and also of funds (funds which are already under scrutiny due to the nature of the case). Once April arrives, this meeting is no longer compulsory and is only required if explicitly requested via a percentage of the involved creditors.
Final insolvency conclusion meetings abolished
A further meeting to be abolished in April is the final insolvency meeting. This particular meeting is usually a formality and is held to simply conclude the proceedings and to officially finalise the case. This is one of many procedures that will change to a digital means and will now be completed via email. Eliminating this meeting aims to further reduce the associated costs and speed up the whole process.
A shift towards digital communication
As the original act and rules were established in 1986, the scope for and means of communication have altered dramatically since then. Email will now serve as the preferred method of communication and many of the procedures and documentations will be transferred digitally. Only a small portion of the physical documentation will remain and this again hopes to modernise the process and improve response times.
Introduction of an opt-out facility for creditors receiving correspondence
Creditors will now have the option to "opt out" of any correspondence they no longer wish to receive. Due to the shift towards digital communication and the use of email, creditors will no longer have to sift through piles of paper to find information that is relevant to them. The only exception is to certain notice of payments such as dividends which will remain mandatory for all parties to receive.
It is clear that the new insolvency rules are a step in the right direction and will bring the industry and its procedures into the modern world. All parties involved should benefit greatly from the advent of digital communication, a concise and clear re-wording of the rules, and the abolition of certain redundant elements of the insolvency process. We can look forward to a smoother and cost-effective process once April arrives.