Insolvency Rule Changes
After much anticipation, The Insolvency (England and Wales) Rules 2016 (the “2016 Rules”) were laid
before Parliament on 25 October 2016 and come into force on 06 April 2017. The 445-page
instrument has received numerous amendments since the original draft and marks a period of change
during the modernisation of the insolvency process.
The main changes in the 2016 Rules include:
1. Consolidating the rules to include the additional 28 statutory instruments that have
amended the Insolvency Rules 1986 (the “1986 Rules”) over the past 20 years.
2. Use of simplified and gender-neutral language to reflect the modern style of drafting used
in more recent legislation. Shifting away from the use of complex jargon, instead favouring
simple, unambiguous language and gender-neutral terms such as ‘Chair’ instead of
‘Chairman’.
3. Restructuring of rules into separate parts for different winding up provisions reduces
repetition and makes the 2016 Rules considerably easier to follow.
4. Consistent drafting with the Insolvency Act 1985 (the “Act”) along with non-legislative
notes assist the reader in identifying the relevant part of the Act. Previously, rule amendments
and inconsistent numbering made it difficult to read the 1986 Rules alongside the Act.
5. Implementation of policy changes made to the Act by the Deregulation Act 2015 (the “DA”)
and the Small Business, Employment and Enterprise Act 2015 (the “SBEEA”). Most policy
changes stem from The Red Tape Challenge initiative in 2012, which focused on reducing
excessive bureaucracy in insolvency proceedings.
The main policy changes are:
Digital World
The 2016 Rules reflect modern business practices, a key feature of which is the use of digital
communication. The following rule changes remove barriers to using electronic communications,
making the insolvency process faster and more efficient.
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Allowing electronic communication without written consent where a debtor and creditor
have been communicating electronically prior to insolvency.
Using websites to show information held by an office-holder without having to obtain a court
order for permission to do so.
Privacy and Reporting
There remains a fine (and hotly contested) line between transparency and confidentiality in insolvency
cases, but the following 2016 Rules attempt to address both ends of the spectrum. A fixed reporting
requirement extends transparency, while restrictions on sensitive data offer protection to creditors.
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Fixed progress reporting period for administration, company voluntary and involuntary
liquidation, and bankruptcy proceedings if the office holder is not the official receiver. This 6 or
12-month reporting cycle (depending on the proceedings) will not change throughout the
lifetime of the case, regardless of whether proceedings are extended or transferred.
A redacted statement of affairs will be filed with the registrar of companies. Details of
employees, ex-employees and customers that are consumers will now be contained in a
separate schedule which will be removed before filing with the registrar.
Creditor Meetings
The right to hold creditor meetings by alternative methods has been available since 2010, however
meetings in person were still the default position. Creditor and final meetings are costly, timeconsuming and notoriously poorly attended by creditors. In any event, proposals are generally
accepted so the introduction of a process of deemed consent means that in most cases meetings can
be avoided altogether. If a meeting is required then alternative methods such as electronic meetings
are considerably cheaper and reflect modern business practices.
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Formal meetings will no longer be the default mechanism to obtain creditor approval. A
process of deemed consent allows proposals to be sent to creditors and deemed approved
unless 10% or more of the creditors object. In the case of on an objection, an alternative
decision-making process such as electronic voting or virtual meetings may be used (with
exceptions).
Final meetings with creditors will no longer be required due to amendments to the SBEEA.
Creditors must still be sent the final report and can object to the same.
Reducing Red Tape
The current insolvency process is heavily burdened with bureaucracy which was the focus of The Red
Tape Challenge. The resulting 2016 Rule changes are designed to reduce the cost and time taken to
complete the insolvency procedure.
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Creditors can opt-out of correspondence but will still receive notification of a potential
dividend in a category that they belong to (and in some other limited circumstances).
Payment of dividend in small debt cases can be made by the office holder without a formal
application being lodged. Small debts (below £1,000), are deemed automatically proven.
Official receiver is appointed trustee on the making of a bankruptcy order as opposed to
being appointed as receiver and manager. The latter was found to be of little benefit and
caused delays in the realisation of assets.
Appointment of insolvency practitioner as the interim receiver is permitted in all
circumstances whereas previously the circumstances were limited.
Impact on Forms
The 2016 Rules divert from the practice of prescribing statutory forms. Instead, the required document
contents are outlined in Part One, with additional content detailed in each specific rule. The changes
are intended to future-proof forms by reducing the number of amendments required going forward.
The Insolvency Service are drafting and maintaining a small number of forms including some
statements of affairs and proxies. HMCTS are also hosting a limited list of forms including statutory
demands and other forms which require filing into court.
Companies House have confirmed a list of around 70 forms which will now fall under their remit.
These forms include company voluntary arrangement and moratorium forms, members or creditors
voluntary liquidation forms, administration, receivership and winding up by the court forms.
Laserform will of course include these forms in the forms library. Where forms have been deprescribed by the Rules, template forms in compliance with the 2016 Rules will be included in the
Laserform library.
Laserform is committed to maintaining the Insolvency form library, and providing updated forms for
April. Once the library is fully updated, we will review any new forms that may be beneficial to our
customers.
We will keep customers informed of the relevant legislative or form changes on the Laserform form
updates page and in LIS bulletins. If you have any comments, questions or feedback on forms of
special interest, please contact [email protected].