Overhaul of Insolvency Rules in England and Wales – Can Northern Ireland expect the same?

11 April 2017

Lynsey_croft

It is common practice that when England and Wales make a legislative change on issues where similar legislation is in place, Northern Ireland follows suit thereafter. For example, on 1st April 2016, the commencement of Insolvency (Amendment) Act (Northern Ireland) 2016 brought in equivalent provisions which had been introduced in England and Wales in 2015.

On the 6th April 2017, new insolvency rules came into force in England and Wales, under The Insolvency (England and Wales) Rules 2016 (IR 2016) which replaces the Insolvency Rules 1986. The new Rules reflect 30 years of advancement in technology and focus is placed on making practice procedures clearer, more simplistic and to facilitate e-delivery.

Practical Changes for Litigators

The prescribed Forms which litigators have used for instigating insolvency proceedings, and as set out in Schedule 4 to the IR 1986, will be abolished, save for very limited circumstances which are outside the scope of this note.

Statutory Demands

  • There is no longer the prescribed form for a statutory demand but requirements for the specific details which the Demand must contain are set out in rule 7.3.
  • An application to set aside a statutory demand need not include a copy of that statutory demand where it is no longer in the debtor’s possession (r10.4 (6))
  • A document, other than a statutory demand, may depart from the required contents if either
    • The circumstances require such a departure
    • The departure, whether intentional or not, is immaterial (r 1.9) (this applies to winding up and bankruptcy petitions)

Bankruptcy Petitions

  • There is no longer the prescribed form for a bankruptcy petition but requirements for what details a petition must include are set out in rules 10.7-10.9.
  • A bankrupt who is made so on a creditor’s application, under the 2016 Rules, only has to produce a statement of affairs if the official receiver gives notice that he requires it under rule 10.55. This amends s288 of the Insolvency Act 1986, mirrored by S261(1) of the Insolvency (Northern Ireland) Order 1989, which states that the debtor will submit a statement of affairs within 21 days from the commencement of the bankruptcy.
  • Insolvency practitioners can be appointed interim receivers of a debtor’s estate before a petition is heard even when it is not specifically the debtor’s petition (rr10.49-10.54).

Winding up Petitions

  • There is no longer the prescribed form for a bankruptcy petition but requirements for what details a petition must include are set out in rule 7.5.
  • Personal delivery of any document is achieved in accordance with the rules for personal service in Part 6 of the Civil Procedure Rules (r1.44). The petitioner must also deliver copies of the petition to the prescribed recipients, listed in rule 7.9. Delivery of such documents is to occur within three business days after the day on which the petition was served on the company, or if the petitioner is the company, within three business days of the company receiving the sealed petition. This is in contrast to the previous position in the Insolvency Rules 1986, and what remains the position here under rule 4.010 (6) Insolvency Rules (NI) 1991, that it is to be “despatched on the next business day after the day on which the petition is served on the company”.

Summary of other key provisions

  1. Creditors owed “small debts” (less than £1000) no longer have to prove in the insolvency process to be entitled to receive a dividend (r14.1 (3)).
  2. Abolition of creditors meetings to appoint a liquidator following a company’s resolution to wind up will now be replaced by deemed consent or virtual meetings (r6.14).
  3. Creditors can now opt out of obtaining communications from the office holder in insolvency proceedings (rr1.36-1.39). They can opt back in at any time but this may be useful in times where the creditor feels there is no real prospect of a dividend.
  4. Creditors are deemed to have given consent to be contacted by email if they had customarily been corresponding with the debtor by electronic means (r1.45) unless they have expressly revoked such deemed consent.
  5. Office holders can now place all future notices (bar some stated exclusions) on a specified website without the need for a Court Order. The documents must be retained on the website for at least two months after the end of the insolvency process (r1.49-1.51).
  6. The requirement to hold final creditors meetings in insolvent liquidations and bankruptcies where there is a trustee in bankruptcy (and members meetings in member’s voluntary liquidations) is abolished (r18.14)
  7. Creditors owed “small debts” (less than £1000) no longer have to prove in the insolvency process to be entitled to receive a dividend (r14.1 (3)).

Whilst it is probable that some, if not all of these changes will be introduced in Northern Ireland with a repeal of the Insolvency Rules (Northern Ireland) 1991 and/or amendments to the Insolvency (Northern Ireland) Order 1989, assessing a time frame for this is more difficult given the current suspension of the Executive.

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