Dear insolvency
practitioner > Chapter 13 > General
1. Distress for the Council Tax The Council Tax (Administration and Enforcement) Regulations 1992 allow local authorities to levy distress for unpaid Council Tax, and you will be aware that, by virtue of section 347(8) of the Insolvency Act 1986, the right to distrain remains even after a bankruptcy order has been made. However, under the Council Tax (Administration and Enforcement) (Amendment) (No.2) Regulations 1993, which came into force on 1 April 1993, local authorities will not be able to levy distress on property which, under section 283(2) of the Insolvency Act, would not comprise part of a bankrupt's estate, ie -
First published in Dear IP no. 27, August 1993) 2. Council Tax Practitioners will be aware that the council tax replaced the community charge in April 1993. Where a qualifying property (as defined by section 6 & 7 of the Local Government Finance Act 1992 and including caravans and boats) forms part of the bankruptcy estate and continues to be occupied after the date of the bankruptcy order, liability for the council tax accruing after the date of the order falls on the person(s) resident in the property. However, the Council Tax (Exempt dwellings) (Amendment) Order 1993 prescribes that no council tax is payable on "an unoccupied dwelling in relation to which a person is a qualifying person in his capacity as a trustee under the Bankruptcy Act 1914 or the Insolvency Act 1986". In those circumstances, all such unoccupied properties would be exempt from Council Tax, regardless of whether the property is owned solely by the bankrupt or jointly owned with another. (First published in Dear IP no. 26, March 1993) 3. Completion of Preliminary Questionnaire Individuals and companies in financial difficulty are occasionally given a misleading impression of bankruptcy and compulsory liquidation procedures. The Official Receiver (OR), has been represented as asking trick questions and generally treating people badly. It is hoped that insolvency practitioners will be able to correct any such misconceptions by giving balanced and accurate advice. ORs ask bankrupts and directors of companies in compulsory liquidation to provide the basic information necessary for dealing with the insolvency by completing questionnaires set out in a standard booklet. These booklets are Crown copyright, and should not be reproduced without the approval of the Service. If a person completes a questionnaire before the bankruptcy or winding-up order he or she will be required by the OR to complete another one under section 235 or 291 of the Insolvency Act 1986. (First published in Dear IP no. 30, March 1994) 4. Secretary of State functions carried out by IPCU The Insolvency Practitioners Compliance Unit (IPCU), based at 2nd Floor, Ladywood House, 45/46 Stephenson Street, Birmingham B2 4UZ, is responsible for carrying out various functions on behalf of the Secretary of State (SoS). It has become apparent, from feedback from both Official Receivers (ORs) and insolvency practitioners (IPs), that there is some confusion as to whom IPs should address their applications, and what information they are required to provide. This article provides guidance on the main SoS functions carried out by the IPCU, together with details of the procedures and the information required. Other functions are carried out by the OR acting for the SoS in lieu of a Creditors' Committee or Liquidation Committee. Details of the ORs functions, and the information he will need to process the application, are detailed below. All applications regarding the following matters should be addressed to IPCU at the above address.
Applications for an exemption certificate should be made in writing to IPCU. Practitioners should not send their own certificates, as official certificates will be issued by IPCU as appropriate. Before an exemption certificate under the above provision can be issued, the following conditions must be satisfied:-
If an office holder needs to delay holding an annual meeting, he should apply to the SoS for a time extension. The application should be submitted in writing before the expiry of the time in which a meeting would otherwise have been held. The office holder should provide a full written explanation of the reasons for the application. The SoS can only extend the time for holding the meeting and cannot give consent to dispense with the meeting altogether.
Generally, trustees in bankruptcy and liquidators of companies in compulsory liquidation are required to pay all funds they receive into the Insolvency Services Account. However, if it is decided to continue the debtor’s/company's business, the office holder may need to operate a local bank account. In requesting authorisation to operate a local bank account, an office holder should provide the following details to enable prompt processing of the application:-
IPCU deals only with remuneration in cases administered under the Bankruptcy Act 1914, and can only fix remuneration of practitioners who have been appointed by the SoS under Rule 337 of the Bankruptcy Rules 1952. Practitioners should apply in writing to have their remuneration agreed. An application should include a time/costs schedule showing the number of hours worked by each grade of staff and the hourly rate applicable.
IPCU also has responsibility for processing applications for release by IPs under the following provisions:-
The relevant form must accompany each application. (First published in Dear IP no. 40, March 1998) 5. Settlement of Official Receiver Costs Following the appointment of a practitioner as trustee or liquidator, the balance (debit or credit) on the estate account is transferred to the practitioner, as evidenced by the receipt of the estate cash book. As a result, control of the estate account passes from the Official Receiver (OR) to the Service’s Central Accounting Unit (CAU). The practitioner is required by the Insolvency Rules (4.107 and 6.125) to discharge any balance due to the OR at hand-over, or alternatively (and more usual in practice) to give an undertaking to discharge any such debit balance from the first assets realised. Settlement of any debit balance on the estate account can only be made by payment into the Insolvency Services Account (ISA) and not to the OR. Where a bankruptcy order is converted to an individual voluntary arrangement after the appointment of a practitioner as trustee, a debit balance is cleared by payment to the ISA. The SoS fee will not be chargeable in those circumstances. However, when a bankruptcy order is converted into an individual voluntary arrangement, and there has been no prior appointment of a practitioner as trustee, the OR will calculate the sum required to settle his costs. The supervisor will either pay this sum to the OR or give an undertaking to discharge it from the first monies realised, and pay the OR at a later stage. Again the SoS fee is not chargeable on the payment. The same principles apply regarding the estate account in corporate voluntary arrangements. Where an order is annulled or stayed following handover to a trustee or liquidator, the OR has no responsibility to calculate the amount required for payment, and practitioners should not ask the OR to make that calculation. Where additional costs become payable, for instance because of the OR’s attendance at an annulment hearing, he will notify both the practitioner and CAU of any adjusted debit balance, which may be cleared by a payment into the ISA. (First published in Dear IP no. 22, August 1992) 6. Examination of Lists of Creditors There have been a number of occasions in the past where practitioners have approached Official Receivers (ORs) and claimed a right to inspect the list of creditors in bankruptcies or compulsory liquidations. In some cases they have been armed with what is purported to be a general authority from a major company or national organisation (which might or might not have been a creditor in the particular case). ORs are not obliged to allow anyone, including a practitioner instructed generally or in a specific case, to inspect lists of creditors, and may only provide a list of creditors prior to the filing of the statement of affairs (as in Rule 12.17) on payment of the appropriate fee – currently 15p per A4 or A5 page and 30p per A3 page. The definition of a creditor is interpreted for this purpose as including a creditor’s representative acting in that specific case, at the time the request is made. (First published in Dear IP no. 10, April 1989) 7. Insolvency Practitioners’ Change of Circumstances IPCU maintains the Service’s database of insolvency practitioners (IPs), and in order to ensure that this is accurately maintained, practitioners are requested to notify IPCU in writing of any changes in their business address or telephone numbers. Similarly, practitioners are also requested to advise IPCU where there is any change in the name of their practice, and when they move between practices. The written notifications should be addressed to Intikhab Mushtaq, IPCU, 5th Floor, Ladywood House, 45-46 Stephenson Street, Birmingham, B2 4UP, or Practitioners Compliance Unit, DX 713897, Birmingham 37. Inaccuracies in the database may lead directly to delays in the processing of payments, and to the appointment of IPs by IPCU on behalf of the SoS. If cases are moved to another office address, the practitioner should immediately give written notice of the move, and details of the files involved and the new office address, to both IPCU and the relevant OR. Contact: Pat Christopher, IPCU (First published in Dear IP no.47, October 1999) 8. Carrying on Business Using Goods Vehicle Operator's Licenses The Traffic Commissioners have asked the Service to remind practitioners that anyone who uses a goods vehicle above 3.5 tonnes gross vehicle weight in the course of a trade or business has to hold an operator's license. This includes both those who carry goods for hire and reward, and those who use lorries to carry their own goods. Similar provisions apply to operators of passenger services vehicles. Licenses are granted by Traffic Commissioners based at six Traffic Area Offices (TAO). Holders of operator's licenses have to meet certain criteria including having sufficient financial resources to maintain the vehicles and being of "appropriate financial standing". An insolvent company or a bankrupt individual is unlikely to meet these requirements but the Traffic Commissioner has discretion to allow such a business to continue to operate. The TAO that issued the license should be informed of any such business going into receivership, liquidation or bankruptcy. If the business is continuing to operate under an administrative receiver, liquidator or trustee, that person must seek the agreement of the Traffic Commissioner. If not, the license document and associated vehicle discs should be returned to the TAO - there may be a refund of fees payable. Addresses can be obtained from the telephone directory, or by telephoning 0117 975 5000. (First published in Dear IP no. 47, October 1999) 9. Enforcement Concordat Insolvency Practitioners Section, London (IP Section) and Insolvency Practitioners Compliance Unit, Birmingham (IPCU) have responsibility for undertaking the Service's enforcement functions in respect of insolvency practitioners authorised by the Secretary of State. Enforcement in this context relates not only to authorisation, statutory compliance and related matters, but also to advisory and monitoring visits. The Cabinet Office has developed a code of practice on enforcement, which all central government and local authority departments with enforcement functions have been encouraged to adopt. On 8 July 1999 the Service formally adopted the code of practice, although it was already applying the underlying principles. The code of practice is embodied in the Enforcement Concordat, which sets out the principles of good enforcement, which are:
While the Enforcement Concordat only applies to insolvency practitioners authorised by the Secretary of State, officials in IP Section and IPCU will also strive to apply the Concordat's principles to all insolvency practitioners with whom they deal. The Service is also encouraging the Recognised Professional Bodies to apply the Concordat's principles in their dealings with the insolvency practitioners they respectively authorise. An explanatory leaflet is available from IP Section, and can be obtained by telephoning 020 7291 6771/2. (First published in Dear IP no. 47, October 1999) 10. Maintaining the Central Index Database Part of the function of the Insolvency Practitioners Compliance Unit (IPCU) is to ensure that the Service database of insolvencies, the Central Index, is accurate. The information recorded about a case on the Central Index includes the name and address of the office holder. This information is in turn used by Central Accounting Unit (CAU) when processing requests by practitioners for cheques drawn on the ISA, and the issue of statements of receipts and payments. Consequently, in order to ensure that CAU provide a service that is as effective and efficient as possible it is imperative that the name and address of the office holder appointed in respect of a particular case is accurate and up to date. Some practitioners currently write to IPCU when they transfer the administration of a case from one office holder within their practice to another, and this helps us keep the Central Index up to date. All practitioners are encouraged to adopt this approach, and IPCU are willing to accept written notification of any changes on a case by case basis, weekly or monthly, to suit the circumstances of each particular practitioner. Practitioners are also reminded that they should notify IPCU of any change of address for their practice, eg when an office is permanently closed or relocated, or a new office is opened. Where an office is closed or relocated, practitioners should provide details of any cases moved as a result of the closure or relocation. Contact: Gareth Limb, Insolvency Practitioners Compliance Unit, the Insolvency Service, 5th Floor, Ladywood House, 45/46 Stephenson Street, Birmingham B2 4UZ (telephone 0121 698 4105) (First published in Dear IP no. 48, November 1999) 11. Redirection of a Bankrupt’s Post: Section 371 of the Insolvency Act 1986 The Service has recently issued guidance to ORs about applications for redirection of post, which is reproduced in part below. Section 371 of the Insolvency Act 1986 permits the court to make an order, on the application of the OR or the Trustee, for the redirection of a bankrupt’s post to an address specified in the order. An application may be made without notice to the bankrupt, (see rule 7.5 of the Insolvency Rules 1986). When seeking redirection orders, ORs have not usually provided the court with a substantial amount of information and have dealt with the matter in a summary way, largely relying on evidence of the bankrupt’s non-cooperation. This approach was questioned by the Vice-Chancellor in a case reported as Singh v The Official Receiver [1997] BPIR 530. He said:-
Following these comments, and from observations made by courts in other cases, ORs now lodge a report, which explains in some detail why the redirection order is being sought. This gives the bankrupt an opportunity to see the case made against him/her so that he/she, can seek a review or rescission of the order if desired. The Service has decided that an OR’s application for a redirection order should normally be made without notice to the bankrupt. ORs have been informed that they should operate within the terms of a redirection order at all times. If, for example, post is redirected by the Post Office in error after the expiry of the order, ORs have been instructed to forward it unopened to the bankrupt. Any error by the Post Office should be drawn to its attention in writing. Items which are clearly of a personal nature should also be forwarded to the bankrupt, without delay, and without being copied. This is especially important when, for example, the bankrupt has sought legal advice, and his/her solicitor’s letter is redirected under the order. Similarly, payments of state benefits must be forwarded to the addressee without delay. If redirection is necessary in a case where the bankrupt has co-operated, for example, where it is likely that remittances from customers might be sent to a former trading address, the bankrupt may consent to the redirection of his/her post from that address. If the redirection order is proving worthless – in the Singh case nothing was actually redirected – the arrangement may be ended. (First Published in Dear IP no 49, March 2000) 12. Application for Redirection of Mail by IPs Royal Mail has confirmed that it will accept written applications from Insolvency Practitioners for the redirection of post, rather than requiring personal attendance at a post office. However, for security purposes the applications should be accompanied by:-
(First Published in Dear IP no.49, March 2000) 13. Transfer of Scottish Widows Business to Lloyds TSB In February the Court of Sessions in Scotland sanctioned the demutualisation of Scottish Widows and its sale to Lloyds TSB Group. As a result of the demutualisation, compensation will be payable at the end of June 2000 to qualifying members of Scottish Widows. ‘Qualifying members’ of Scottish Widows will receive £500 as fixed compensation (subject to minor exceptions, qualifying members are those with Scottish Widows policy at 22 June 1999 or those that had sent in a proposal for one by that date and in both cases keep up the policy.) In addition, qualifying members with ‘qualifying with profits policies’ will also be entitled to receive variable compensation based upon:
(Qualifying with profits policies are those that were taken out before 1 January 1999). Insurance policies are property (as defined by section 436 of the Insolvency Act 1986) which vest in the trustee in bankruptcy (under Section 306 of that Act). The only exception to this is that any protected rights in pensions will not pass to the trustee in bankruptcy. In addition, if an occupational pension scheme’s rule, which are applicable at the date of the bankruptcy order, contain a valid forfeiture clause that forfeits the pension benefits on the making of such an order, then the trustee in bankruptcy will be unable to claim them for the benefit of the bankrupt’s creditors. It is the view of the Insolvency Service that any compensation payable ‘arises out of or is incidental to the property’, for the purposes of section 436 and, therefore, also vests in the trustee. Solicitors acting for Scottish Widows have informed the Insolvency Service that when making the compensation payments it may not always be possible for Scottish Widows to identify bankruptcy situations. Insolvency practitioners may, therefore, wish to enter into correspondence in all cases where a bankrupt or former bankrupt has a policy with Scottish Widows to ensure that, where appropriate, the compensation is paid to the bankruptcy estate. Enquiries should be addressed to Shona Manson, The Insolvency Service, Technical Section, 21 Bloomsbury Street, London, WC1B 3QW (Telephone 020 72916778). (First published in Dear IP no. 50, June 2000) 14. Individual Insolvency Registers The rules governing the Individual Insolvency Register are now placed in new Part 6A, including those relating to Individual Voluntary Arrangements (IVAs) (omission of rule 5.28). Details will be maintained of Bankruptcy
Orders, Individual Voluntary Arrangements, Bankruptcy Restrictions
Orders, Interim Bankruptcy Restrictions Orders and Bankruptcy
Restrictions Undertakings. The registers will be maintained by the
Secretary of State and made available to the public for inspection
within office opening hours. The Secretary of State has an obligation to
enter and remove such information as soon as reasonably practicable (new
rule 6A.1) Rectification of inaccuracies on any register
to be made as soon as reasonably possible and the date of death of a
bankrupt is to be recorded on the register on receipt of notice to that
effect (new rule 6A.8). Information
relating to all existing and new IVAs and fast-track IVAs (see
Article 17, Chapter 24 of this issue) is to be entered on
receipt of the appropriate notice. Those details are to be deleted immediately
on notice of the completion, termination or revocation of the IVA (new
rules 6A.2 to 6A.3). Information is to be entered relating to all
existing bankruptcies and to new bankruptcy orders on receipt of the
order from the court. Such
details are to be deleted immediately on notice of the bankruptcy order
having been annulled or rescinded and after three months from the date
of discharge (new rules 6A.4 to 6A.5). Information relating to Bankruptcy
Restrictions Orders, Interim Bankruptcy Restrictions Orders and
Bankruptcy Restrictions Undertakings to be entered when made or
accepted. Such details to
be deleted immediately on expiry or ceasing to have effect (new rules
6A.6 to 6A.7). The new rules above replace existing rules
6.223A to 6.223C, which are omitted.
General
enquiries may be directed to Policy.unit@insolvency.gov.uk 15.
Proof of Debt forms in bankruptcy and company liquidation From
1 April 2004 it will no longer be necessary for a proof of debt form to
be sent to all creditors in every bankruptcy case.
Rule 6.97 has been amended to provide that a creditor must
be sent a proof of debt form upon request but other than that the
trustee will be able to send out proof of debt forms at his/her
discretion. Official
receivers will issue proof of debt forms to creditors where a creditors’
meeting is convened for the appointment of a trustee, and insolvency
practitioners should, following appointment as trustee, continue to
receive the proofs from the official receiver after handover of the
estate. However, there may
be cases where a trustee is appointed and where the official receiver
has not issued proof of debt forms.
The proof of debt form (form 6.37) has been simplified and is now a
one‑page document. Rule
6.146(2) has been deleted.
It will no longer be necessary for a trustee to file proof of debt forms
at court when he/she has completed the administration of the bankrupt’s
estate. Equivalent
changes have been made for compulsory liquidation (rule 4.74,
form 4.25 and rule 4.138(2)).
No changes have been made to the current procedure for voluntary
liquidations.
General
enquiries may be directed to Policy.unit@insolvency.gov.uk
16.
Guidance to Official Receivers (ORs) on case administration Some
IPs have asked if they can be informed of changes in the guidance given
to ORs on the case administration of bankruptcies and compulsory
liquidations as a result of the Enterprise Act. Guidance
on case administration generally is made available to ORs and their
staff in the form of a Technical Manual (Volume 1) and a Case Help
Manual. The Technical
Manual is likely to be of most interest to IPs and contains full
legislative references. The
Case Help Manual explains the processes to be adopted within the ORs’
offices, e.g. which statutory and internal forms and computer screens
need to be completed, in order to give effect to the guidance contained
in the Technical Manual. The
manuals are published on The Insolvency Service’s website under The
Service’s Freedom of Information Act 2000 publication scheme at: www.insolvency.gov.uk/pubsscheme/main.htm
. Both manuals are being
updated to take account of the changes provided by the Enterprise Act
2002 and related secondary legislation and the revisions should be
available from 1 April 2004. Hard copies of the Manuals are not
available.
General
enquiries may be directed to IP Policy Section Email: IPPolicy.Section@insolvency.gov.uk 17. Information to Official
Receivers following the Court of Appeal decision in Spectrum Plus
Limited Following the decision of the Court
of Appeal in the matter of National Westminster Bank plc v Spectrum
Plus Limited and others [2004]
All ER (D) 390 (May) the case will be referred to the House of
Lords. Until that hearing
it is difficult for the Insolvency Service to provide definitive
guidance on this issue.
However, insolvency practitioners may be interested to read the advice
recently prepared for Official Receivers, an extract of which is set out
below. Sir Andrew Morritt gave judgment in
the High Court in the matter of National Westminster Bank plc v
Spectrum Plus Limited and others [2004] 2 WLR 783.
The Vice-Chancellor, in giving judgment, followed the position of
the Privy Council in the matter of Agnew v The Commissioners of
Inland Revenue (Brumark). The Bank appealed the decision of
the Vice Chancellor. On 26
May 2004 the Court of Appeal gave a unanimous decision and allowed the
appeal. The Court of Appeal was comprised
of the Master of the Rolls, Lord Philips, Lord Justice Jonathan Parker
and Lord Justice Jacob. In
allowing the appeal they upheld the decision in Siebe Gorman & Co
Limited v Barclays Bank Ltd [1979] 2 Lloyds Rep 142, (Siebe Gorman). As
a consequence the position of fixed charges over book debts remains
confused. HM Customs &
Excise, the Commissioners of Inland Revenue and the Secretary of State
for Trade and Industry, who are joint respondents in this matter, will
seek permission to appeal to the House of Lords. The Court of Appeal found that the
debenture held by the National Westminster Bank plc
(the Bank) over the assets of Spectrum Plus Limited (Spectrum) did
create a fixed charge over book debts.
The debenture followed a standard form used over the last
25 years by all major clearing banks.
The terms of the debenture, essentially, follow the clauses which
had been approved as creating an effective fixed charge over present and
future book debts by Mr Justice Slade in the case of Siebe Gorman. Official Receivers may recall that
in the Spectrum case in the High Court the Vice Chancellor had drawn
heavily on the decision of the Privy Council in the case of Brumark and
Lord Millett's three-staged process in deciding whether a charge was a
fixed charge or a floating charge.
Applying those conclusions, the
Vice Chancellor determined that a restriction within the debenture,
which nevertheless allows the collection and free use of the proceeds of
the book debts, is inconsistent with the nature of a fixed charge.
The Vice Chancellor "very reluctantly" concluded that
Siebe Gorman was wrong. The Court of Appeal overturned this
decision and concluded that Siebe Gorman should be upheld.
A prohibition on disposing of book debts prior to collection,
together with an obligation to pay the proceeds into an account, in the
judgment of the Court of Appeal was sufficient to give rise to a fixed
charge on book debts. If
the bank is in a position to exercise control over the book debts,
then this is sufficient, whether or not the bank does exercise that
control. The Court also considered that,
notwithstanding that Siebe Gorman was upheld on legal grounds, Siebe
Gorman should be upheld on public policy grounds.
Over the last 25 years banks, borrowers and guarantors have
proceeded on the basis that debentures based on the Siebe Gorman
decision will create a fixed charge over book debts.
The need for commercial certainty requires that Siebe Gorman be
followed. Conclusion It is anticipated that leave to
appeal to the House of Lords will be granted.
Whilst it is hoped that the matter might be dealt with
expeditiously, there is still some time to go before the matter is
determined conclusively. Official Receivers should therefore
continue to follow advice previously given in relation to book debts
where the charge is considered to be a floating charge as the elements
of control, as described in Brumark, over the collection and disposition
of the debts are absent.
That advice was to agree a way forward with the debenture holder so that
the collection of debts is not imperilled, and to deposit the
realisations in a suspense or other appropriately named account and held
until the legal position becomes clearer. Offers by debenture holders, for
example, to divide (disputed) book debt realisations equally to enable a
case to be closed pending further appeal in the Spectrum case should
still be refused but if, in the unlikely event that creditors, including
creditors for liquidation expenses, are willing to consent to such an
arrangement in an individual case, without setting a precedent, to
progress it, such an offer might be accepted. Note: Leave to appeal to the House of Lords has been granted since the guidance was provided to Official Receivers.
General
enquiries may be directed to IP Policy Section Email: IPPolicy.Section@insolvency.gov.uk 18. Guidance
issued to Insolvency Service staff regarding allowable expenses when
considering an income payments agreement (IPA) or income payments order
(IPO) In response to queries raised, IPs
may be interested in the following guidance issued to Official
Receivers. In
order to achieve as consistent a policy as possible when dealing with
IPAs and/or IPOs, an internal notice was issued to Insolvency Service
staff setting out guidance on what may be regarded as acceptable family
expenditure before an IPA or IPO should be considered. This guidance has
now been incorporated into Chapter 31.7 of the Insolvency Service’s
Technical Manual, which is general guidance to staff on the
administration of bankruptcy and compulsory liquidation cases and is
available on‑line through the Freedom of Information Publications
Scheme (www.insolvency.gov.uk/pubsscheme).
It should be remembered that the guidance is exactly that – ie
guidance. Individual cases
and circumstances will always be considered on their own merits. In
addition to the Technical Manual, Insolvency Service staff are guided
towards the Family Expenditure survey, which is carried out each year by
the Office of National Statistics. A link to the family Spending Review
for 2002/03 is: www.statistics.gov.uk/StatBase/Product.asp?vlnk=361.
Once
a person’s real disposable income has been assessed, ie the income
remaining after all expenditure necessary to finance the reasonable
domestic needs of the bankrupt and his/her
family, the Service guide is that between 50 and 70% of this should be
sought by way of monthly payments under an IPA or, if necessary, an IPO.
As a general rule, the higher the real disposable income, the higher the
percentage which should be sought.
Guidance as to what amount is appropriate is contained in the
table attached. Again, it should be stressed, this is a guide to staff
only; all cases should be judged on their own merits and circumstances.
General
enquiries may be directed to oros@insolvency.gov.uk; 19. Joint Insolvency Committee’s
response to the Insolvency Practices Council’s recommendations In their 2003 Annual Report the
Insolvency Practices Council (IPC) made four recommendations to the
bodies involved in the insolvency profession.
The Annual Report can be viewed in full on the IPC’s website at
www.insolvencypractices.co.uk. The Joint Insolvency Committee (JIC)
has recently responded to the IPC on their recommendations, and
practitioners may be interested to read a summary of both
recommendations and the responses, which are given below: Recommendation 1 Individual Voluntary Arrangements (IVA) The IVA as currently structured is
too complex and, therefore too expensive for cases of personal
indebtedness. Consideration
should be given by the profession in conjunction with the Insolvency
Service to designing a simpler product, which would suit many more
cases. JIC response The JIC fully support the comments
made within your first recommendation.
This issue has been debated in many forums recently and we hope
that your comments will assist the debate, which must be channelled
towards the development of an alternative procedure.
We have written in these terms to the Insolvency Service and look
forward to contributing to the progress of this issue in future. Recommendation 2 Regulation and monitoring The
Recognised Professional Bodies (RPBs) need to adopt a more pro-active
approach to regulation and not just when a complaint is made. This may well require an enhancement of the number and
quality of monitoring staff. JIC response The JIC is extremely concerned at
the comments made within your second recommendation and in the body of
the report concerning regulation and monitoring.
The comments are made without reference to any substantive
supporting evidence and without identifying clearly how regulation and
monitoring is not working. Although the substance of your
report identifies the Joint Insolvency Monitoring Unit (JIMU) in
particular, the JIC considers that the criticisms may be taken to apply
across all monitors and considers it important to express its support
for the monitors, both as to their quality and what they do; they are,
after all, doing no more (and no less) than is required by the licensing
bodies by which they are employed! The monitoring system satisfies the
Insolvency Service’s Principles for Monitoring Insolvency
Practitioners. Regular
reviews are undertaken by the Insolvency Service and no suggestions for
substantive change have been made. The monitors meet on a regular
basis to exchange views and to ensure consistency of approach. All
monitors are aware of the importance of distinguishing between
significant issues such as remuneration, bonding, accuracy of
information and disclosure against less significant details. However,
even some areas which could be regarded as minutiae must be drawn to the
attention of the IP as these are invariably statutory requirements. They
are likely to contribute to an overall assessment of how the IP is
performing. The
significance of the issue raised will be a factor in considering whether
regulatory action is necessary. If the IPC does in fact have
evidence to support its assertions, the JIC would ask that details of
the evidence are now provided to it, or to the licensing bodies
individually, if this is more appropriate.
That would provide a better and clearer basis for discussion
about the comments and recommendations. Recommendation 3 Joint Disciplinary Body The
RPBs could consider creating a joint disciplinary body in a similar way
to that created by the Actuaries or at least a joint fact-finding and
investigation unit. JIC response The Report does not indicate why
the insolvency profession would be better served by the creation of a
joint disciplinary body or fact-finding and investigation unit.
Without further persuasive arguments, the JIC cannot see any
merit in taking this recommendation forward. Recommendation 4 Aged Bankruptcy Cases The
large number of old bankruptcy cases being passed out by the Protracted
Realisations Unit of the Insolvency Service are being dealt with in many
different ways by IPs. There
does not appear to be a standard approach and we recommend that the
Insolvency Service issue some form of guidance. JIC response The Insolvency Service has now
issued a protocol for IPs handling cases which have been passed to them
from the Protracted Realisations Unit.
This will alleviate concerns that practitioners are handling
these cases in a variety of different ways.
The JIC noted that the Insolvency Service required practitioners
to “sign up” to the protocol and would refer any cases where
practitioners did not follow the protocol to their licensing body. General
enquiries may be directed to IP Policy Section Email: 20.
New chairman appointed for the Insolvency Practices Council (IPC) IPR
Services Ltd, the company that funds the IPC, has appointed Geoffrey
Fitchew to succeed Graham Kentfield, the first chairman of the IPC who
retires in December 2004. Geoffrey Fitchew was Chairman of
the Building Societies Commission and Chief Registrar of Friendly
Societies until 2002. He
was formerly a senior civil servant in the Cabinet Office and H M
Treasury.
The IPC is an independent advisory
body formed in 2000 that examines the professional and ethical standards
of the insolvency profession. Further
information about the IPC is available from www.insolvencypractices.co.uk. General
enquiries may be directed to IP Policy Section Email: 21. Joint Insolvency Committee The 2004 Annual Report of the Joint Insolvency Committee (JIC) has been available on the Insolvency Service Website http://www.insolvency.gov.uk/information/iparea/jic.htm since April 2005. As insolvency practitioners will be aware the JIC was formed in 1999 and two of its most important functions remains the promotion of standards amongst insolvency practitioners and the provision of guidance of a regulatory, ethical or best practice nature. With the aim of clarifying the status of Statements of Insolvency Practice (SIPs) during the past year the JIC has revised the introduction common to all SIPs. A revised SIP 9 on the remuneration of office holders was issued together with a new SIP 15 (Reporting and providing information to Committees). The JIC has also been instrumental in drafting guidance papers on different aspects of insolvency which are not covered by SIPs and, although not prescriptive, will provide practical solutions to the type of problems that insolvency practitioners encounter. The first two papers on the “Control of cases” and “Succession planning” were issued by the Authorising Bodies in early April 2005. As part of its efforts to promote good communication and consistency between the regulatory bodies the JIC also held a Regulatory Forum on 12 May 2005. This considered regulation from the view of not only the regulatory authorities but also other interested groups. Selected speakers representing the views of bond providers, government departments as creditors in insolvency proceedings and the Insolvency Practices Council (representing the public interest) were in attendance. Following the morning speakers, delegates were invited to submit written questions which were then used to form the basis of the discussion led by JIC members in the afternoon. The JIC panel selected four topics, Industry Intelligence, Value for money, Consistency, and Monitoring which were felt to be of most interest to the forum and the discussions on these topics were wide ranging. The JIC has agreed to consider further the issues raised as part of its working agenda. The JIC has continued its work on a revised version of the Ethical Guide which began in 2004 and this is expected to continue through 2005. The Committee also continued to develop its relationship with such bodies as R3 and the IPC and engaged in reviews of aspects of insolvency law.
General
enquiries may be directed to IP Policy Section Email: 22. Practice Note
on the Hearing of Insolvency Proceedings 1.
The following statement was issued by the Vice-Chancellor on 23
May 2005. 2.
This Practice Note supersedes all previous Practice Statements of
the Bankruptcy Registrars dealing with jurisdiction and work
distribution and the Guidelines issued by the Insolvency Court Users’
Committee in November 1988. 3.
As a general rule all petitions, claims and applications (except
for those listed in paragraph 4 below) should be listed for initial
hearing before a registrar or district judge in accordance with rule
7.6(2) Insolvency Rules 1986. 4.
The following applications should always be listed before a judge: Proceedings relating to insolvent companies
Proceedings relating to insolvent individuals
5.
When deciding whether to hear proceedings themselves or refer or adjourn
them to the judge, the registrar or district judge should have regard to
the following factors:
6.
Litigants and their advisors are reminded that paragraph 17 of
the Practice Direction on Insolvency Proceedings applies to appeals and
that an appeal from a registrar, district judge or County Court judge
lies, in the first instance and without permission, to a single judge of
the High Court. General enquiries may be directed to Policy.unit@insolvency.gov.uk; Telephone: 020 7291 6740 23. Relief for
the Indebted –An Alternative to Bankruptcy? This Insolvency Service consultation concerning a proposed
non-court based debt relief procedure for individuals who owe relatively
little, have no means to pay their debts and are not able to access any
of the currently available debt resolution procedures closed on 30th
June. We are in the process of analysing responses and will be
issuing a report on the findings of the consultation in due course. General enquiries may be directed to Policy.unit@insolvency.gov.uk; Telephone: 020 7291 6740 24. Update on the evaluation of the Enterprise Act 2002 and prescribed part returns The latest Interim Evaluation report is available on the Insolvency Service website, please click the link We expect to issue a final report towards the end of next year. As part of the evaluation we wish to determine whether the prescribed part has been set at an appropriate level but unfortunately the number of prescribed part returns being submitted have decreased markedly and we would like to take this opportunity to request that insolvency practitioners continue to provide returns for all cases involving a floating charge where the proceedings commence up to April 2006. A copy of the return is available from our website, please see the link below. Please return completed forms to insolvency.reform@insolvency.gov.uk, or to Prescribed Part Evaluation, Policy Unit, The Insolvency Service, Area 5.7, 21 Bloomsbury Street, London, WC1B 3QW.
General enquiries may be directed to Policy.unit@insolvency.gov.uk; Telephone: 020 7291 6740 25. Meeting with Compliance Managers In Dear IP Issue No 22, March 2005, expressions of interest were sought for a meeting between compliance managers and monitors of the RPBs and the Secretary of State. Two meetings were subsequently held in September 2005. The first was attended by 11 compliance managers of the larger Insolvency Practitioner firms and the second by 11 compliance managers of medium sized Insolvency Practitioner firms. Several topics were discussed, including monitoring visits where practitioners were authorised by different authorising bodies; continuity between monitoring visits; qualitative value; compliance implications of a paperless office; the Leyland Daf decision and Money Laundering. It is considered that the meetings were a success and will pave the way for more and better communication between those involved in compliance within the Insolvency Profession and the monitors. Consideration will be given to holding similar meetings in the future. I would like to thank all of those who expressed an interest in these meetings, and who took part. If anyone wishes to obtain a copy of the notes of either meeting they should e-mail me.
General enquiries may be directed to IPU.Email@insolvency.gov.uk 26. JIEB Examiner vacancies JIEB has a vacancy for an examiner on the Administrations, Company Voluntary Arrangements and Receiverships papers. A job description, details of the individual responsibilities of examiners and how to apply are given in an annex attached to this chapter. The closing date is 20 January 2006.
Any enquiries arising from this article should be directed towards Mike Chapman of Insolvency Practitioner Policy Section, tel: 020 7291 6765, email mike.chapman@insolvency.gov.uk 27.
Responding to correspondence Insolvency
practitioners are reminded that in late 2001 / early 2002 the
authorising bodies urged their practitioners to respond to
correspondence in a timely manner (a period of ten working days was
suggested by some bodies), where appropriate by sending an
acknowledgement if a substantive response could not be provided within
that timescale. Insolvency
practitioners are also reminded that in accordance with the Ethical
Guide they should conduct themselves with courtesy and consideration
towards all with whom they come into contact during the course of
performing their work and that failure to follow that guidance could
constitute misconduct. Complaints about a breakdown in communications or a failure by some insolvency practitioners to communicate continue to form a significant proportion of complaints to the authorising bodies (16% to 18% in 2003 and 2004). It is appreciated that the nature of the work of insolvency practitioners is such that they may occasionally encounter individuals whose expectations they are unable to meet, but a clear explanation of the facts at an early stage, together with details of the practitioner’s internal complaints procedure (if any) or contact details of the practitioner’s authorising body should help to resolve differences. General enquiries may be directed to IP Policy Section Email: IPPolicy.Section@insolvency.gov.uk Telephone:
020 7291 6772 28.
Insolvency Practitioner’s details Practitioners will be aware that one of the responsibilities of the Insolvency Practitioner Unit (IPU) is to ensure the accuracy of Insolvency Practitioner’s details held on The Service’s database. The information is required by Official Receivers to ensure accurate production of Secretary of State applications, by IP Banking when dealing with cheque requisitions from office holders and, where appropriate, for publication on The Insolvency Service website. An exercise recently carried out by IPU to update insolvency practitioner’s details canvassed all practitioners and resulted in some 900 amendments being made to the database including the removal of 123 entries. As insolvency practitioners become increasingly transient, the onus on them to
ensure the Unit is kept up to date is even greater.
General
enquiries may be directed to IPU.Email@insolvency.gov.uk
29. Update on research projects commissioned by The Insolvency Service. As part of our commitment to evaluate the provisions
of the Enterprise Act 2002, The Insolvency Service has commissioned
several research projects. On the Corporate side, these are: (1)
‘Report on Insolvency Outcomes’ by Dr Sandra Frisby from the
University of Nottingham. This report is based on the findings of
research conducted between November 2004 and May 2006 and consisted of
the construction of a database of 2063 companies, which entered into
administration or administrative receivership between September 2001 and
September 2004. Additionally a series of interviews with insolvency
practitioners (2)
‘Study of Administration Cases’ by Alan Katz and Michael
Mumford, Research Fellows at the International Centre for Research in
Accounting at Lancaster University. This paper considers changes in the
use of administration relative to other corporate insolvency procedures
and focuses on whether there may have been some substitution of
administration for liquidation. The study also assesses the extent to
which cases that went into administration during 2004 could be shown to
meet the statutory purpose of administration. (3)
‘The Impact of the Enterprise Act 2002 on Realisations and Costs
in Corporate Rescue Proceedings’ by John Armour, Audrey Hsu and Adrian
Walters, Research Fellows at the Centre for Business Research, Cambridge
University, Department of Accounting, National Taiwan University and
Nottingham Trent University respectively. In particular, this study
compares the operation of the new streamlined administration procedure
to that of administrative receivership. Full
copies of their reports can be found on our website, along with other
research papers and can be accessed here.
The Insolvency Service has hosted seminars for the authors to present
their findings, which have resulted in informative discussion amongst
those present. We are sure you will find these papers of equal
interest.
The Insolvency Service is committed to developing evidence-based policy
and to support this, it undertakes research and evaluation to:
Details
of evaluation work undertaken by The Insolvency Service can also be
found on our website and can be accessed here. Final
evaluation reports of the Enterprise Act 2002 will be published later
this year.
General enquiries may be directed to Policy.unit@insolvency.gov.uk; Telephone: 0207 291 6740 30.
UNCITRAL CLOUT Correspondent The
means for collecting and disseminating court judgments and arbitral
awards that relate to legal texts emanating from the work of the
UNCITRAL (United Nations Commission on International Trade Law)
Commission is known as ‘Case Law on UNCITRAL Texts’ (CLOUT). The
collection of court judg As
the UNCITRAL Model Law on Cross-Border Insolvency has been enacted
within Great Britain (The Cross-Border Insolvency Regulations 2006 (SI
2006/1030) came into force on 4th April 2006), we have deemed it
appropriate to appoint a National Correspondent in respect of cross
border insolvency matters. Professor
Ian F. Fletcher, Professor of International Commercial Law, University
College London and a Barrister at 3-4 South Square, Gray’s Inn, London
has kindly accepted our invitation to take on this role. The
primary task of the National Correspondent is to collect judgments
issued by the courts in Great Britain and to prepare abstracts and
forward them to the Secretariat of the UNCITRAL Commission. The
abstracts submitted are then translated and published in all six UN
Languages, and available on the CLOUT website at:
http://www.uncitral.org/uncitral/en/case_law.html
To assist Professor Fletcher, in his role as the designated reporter for
Great Britain, it is important that he becomes aware of any cases where
the Model Law is used (including possibly some which do not reach court,
e.g. because a party from whom information is required realises that the
Model Law makes it inevitable that they will have to comply in the end).
To this end, if you or any of your colleagues were involved in a Model
Law application, it would be very much appreciated if you could supply
the following information to Professor Fletcher: 1)
Full name of the case and any identifying reference numbers, such
as court listing number; 2) Neutral citation where allocated; 3) Names of the court and of the judge; 4) Date(s) of hearing and decision; 5) If possible, some information about the subject matter of the application, details of the articles of the Model Law that are invoked for the purposes of the application/decision – and (where available) any transcript of the case; 6) If the case is reported in a citable series of reports, those details should be included.
In addition, it would be helpful if the names of the parties’ legal
representatives were also provided. Could you please send details to Professor I.F. Fletcher, Faculty of Laws, University College London, Bentham House, Endsleigh Gardens, London WC1H 0EG. If using electronic communication, the following address should be used: i.f.fletcher@ucl.ac.uk Any enquiries regarding this article should be directed towards Muhunthan Vaithianathar, Policy Unit, Area 5.7, 21 Bloomsbury Street, London, WC1B 3QW; telephone: 020 7637 6515, email: muhunthan.vaithianathar@insolvency.gov.uk General enquiries may be addressed to Policy.unit@insolvency.gov.uk; Telephone: 0207 291 6740 31. Proposals for the reform
of the debtor petition process In
2006, over 80% of bankruptcy orders made in England and Wales were from
debtors petitioning for their own bankruptcy.
The increase in the number of bankruptcy orders made in the last
four to five years, particularly debtors own petitions, has undoubtedly
contributed to the strain on HM Court Services’ resources. In
some parts of England and Wales debtors face a wait of up to four months
from initial contact with the courts to obtaining debt relief via a
bankruptcy order. Other court users also face lengthy delays as court
staff deal with non-contentious debtor petitions.
If one considers that the role of the court is to resolve
disputes, it can be argued that as there is no dispute in a debtor’s
petition case, there is no need for the debtor to go through the court
system in this first instance. Proposal The
Insolvency Service is therefore proposing to remove the requirement that
the debtor must file a petition for bankruptcy at court.
Instead, the Official Receiver could make the bankruptcy order
administratively, thus freeing up the court’s time to deal with
creditor’s petitions, public examinations, bankruptcy restriction
orders, income payment orders, and other contentious matters and civil
processes. Consultation Since
22 October 2007 we have been inviting all interested parties to take
part in the consultation on the above proposals.
The consultation document, entitled ‘Bankruptcy:
proposals for reform of the debtor petition process’ can
be accessed at The Insolvency Service website in the live consultation
register, or at the following address:
http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/con_doc_register/registerindex.htm The
consultation closes on 11 January 2008. Any
enquiries regarding the consultation or requests for hard copies of the
proposal document should be directed to Maria Isanzu, Policy Unit, Area
5.7, 21 Bloomsbury Street, London WC1B 3QW; telephone: 020 7291 6733
email: maria.isanzu@insolvency.gov.uk.
General
enquiries may be directed to Policy.unit@insolvency.gov.uk, Telephone: 0207
291 6740. 32.
Enterprise Act 2002 – Corporate Insolvency Provisions: Evaluation
Report and discussion/forum on the future development of corporate
insolvency
The Insolvency Service has
completed an evaluation of the corporate insolvency provisions of the
Enterprise Act 2002, which came into force on the 15 September 2003.
The evaluation was undertaken to
comprehensively assess whether, to what extent and how the provisions of
the Enterprise Act 2002 met its policy objectives and to capture the
real effects of the legislative action.
The evaluation includes both quantitative and qualitative data
collected from various sources over a four-year period. The evidence from the evaluation
indicates that the Enterprise Act 2002 is having some success in
achieving its objectives. In summary, The Enterprise Act:
As a result of the evaluation,
there are four main recommendations for the future: (a)
A review of Creditors Voluntary Liquidation (b)
Continued monitoring of the impact of the Enterprise Act and
further evaluation, in particular looking at the impact of the ‘prescribed
part’ (c)
Continued use of insolvency academics, other specialists and
stakeholders in evaluation activities (d)
Continued observance of the impact of case law and other
legislation on the Enterprise Act and statutory amendments to be made as
required A full copy of the evaluation
report can be found on our website and can be accessed at the following
address:
EA02CorporateInsolvencyReport.doc
The Insolvency Service also hosted a seminar on the
12 February 2008 to present the key findings of the evaluation report
and to discuss widely and openly how corporate insolvency may develop in
the future. To inform this discussion, a panel of experts was asked to
give their personal views on the future development of corporate
insolvency. Professor David Burdette of
Nottingham Trent University gave an academic view. Jennifer Marshall, a
partner in the Global Restructuring Group at Allen and Overy gave a
legal practitioners view and Steven Law, a partner at Ensors gave an
insolvency practitioners view. This was then followed by a question and
answer session. Slides and notes from the seminar
can also be found on our website and can be accessed at the following
address: Any enquiries regarding the above
should be directed towards Muhunthan Vaithianathar,
Policy Unit, Area 5.7, 21 Bloomsbury Street, London, WC1B 3QW;
telephone: 020 7637 6515 email: muhunthan.vaithianathar@insolvency.gov.uk General enquiries may be directed
to Policy.Unit@insolvency.gov.uk Telephone:
0207 291 6740
33. Floating charges and application of the prescribed part The case of Thorniley v Revenue
and Customs Commissioners (Ch D (Companies Ct)) (also known as Airbase
(UK) Limited, Re (Ch D (Companies Ct))) has clarified the position
regarding the “prescribed part” of the company’s assets set out in
section 176A of the Insolvency Act 1986, from which unsecured creditors
must be paid in priority to floating charge holders. The court has
confirmed that the remaining, effectively unsecured amounts due to the
floating charge holder(s) do not constitute “unsecured debts” for
the purpose of section 176A(2), and cannot partake of the prescribed
part. Any shortfall relating to a floating charge over the company’s
assets should be excluded from distributions from the prescribed part. In arriving at this conclusion the
court considered the construction and wording of section 176A,
particularly subsection 176A(2)(b). This provides that the liquidator,
administrator or receiver “shall not distribute [the prescribed
part] to the proprietor of a floating charge except in so far as it
exceeds the amount required for the satisfaction of unsecured debts”.
Any enquiries regarding this
article should be directed towards Andrew Shore, IP Policy Section, Area
5.7, 21 Bloomsbury Street, London, WC1B 3QW; telephone: 020 7291
6769; email: andrew.shore@insolvency.gov.uk General enquiries may be directed
to IPPolicy.Section@insolvency.gov.uk;
Telephone: 020 7291 6772 34.
Enterprise Act 2002 – Individual Insolvency Provisions: Evaluation
Report The Insolvency Service has
completed an evaluation of the individual insolvency provisions of the
Enterprise Act 2002, the majority of which came into force on 1 April
2004. The evaluation was undertaken to
comprehensively assess whether, to what extent and how the provisions of
the Enterprise Act 2002 met its policy objectives and to capture the
real effects of the legislative action. The evaluation includes both
quantitative and qualitative data collected from various sources over a
four-year period. The
evidence from the evaluation indicates that the individual insolvency
provisions of the Act have achieved their intermediate policy objectives
in most areas – of the 18 intermediate policy objectives, 15 have been
fully or partially achieved. Where intermediate policy objectives have
been only partially achieved, this is mainly due to third-party actions
over which The Insolvency Service has no control. As
regards the ultimate objectives of the individual insolvency provisions
of the Act:
The main recommendations as a result of the evaluation are that The
Insolvency Service:
A full copy of the evaluation report can be found on
our website and can be accessed by the following link: Any enquiries regarding the above
should be directed towards Caroline Burton, Policy Unit, Area 5.7, 21
Bloomsbury Street, London, WC1B 3QW; telephone: 020 7637 6517
email: caroline.burton@insolvency.gov.uk General enquiries may be directed
to email policy.unit@insolvency.gov.uk Telephone 020 7291 6740 35.
Change to JIEB syllabus and examination process The syllabus for the 2008
Joint Insolvency Examination has been brought into line with current
examination practice by restating the syllabus from the format of a
list of topics into a series of objectives or learning outcomes which a
successful candidate should be able to achieve. The intention has
been to prepare a syllabus that is generic to the three papers
(Personal Insolvency; Liquidations; and Administrations, Company
Voluntary Arrangements and Receiverships) and to two jurisdictions (England
and Wales, and Scotland). This avoids much of the duplication and very
detailed lists of procedures that were a feature of the syllabus
format of prior years. The learning
outcome syllabus is also intended to set out clearly the
distinctions between non-formal practice of an analysis and advice
nature and formal practice of appointments as office holder. However, this reformatting of
the syllabus is not intended to introduce any substantive change from
the 2007 syllabus in the subjects that may be examinable (other than
routine updating for legislation in force at 30 April 2008). The subjects of the three papers
remain Liquidations; Administrations, Company Voluntary
Arrangements and Receiverships; and Personal Insolvency.
Candidates who have not yet passed any of the papers may now elect to
sit only one paper, should they wish. Those who have passed at least one
of the three papers must pass the remaining paper(s) in a single
session. An additional 30 minutes has been
allowed in each exam for candidates to read and check their work. The
standard examination time is therefore now three hours and thirty
minutes (3:30). Examinations will take place in
November each year (rather than December, as was previously the case),
and will typically fall on the first Monday, Tuesday and Wednesday of
the month. This year the examinations fall on 3, 4 and 5 November. A copy of the 2008 syllabus and
Notes for Candidates can be found at: Any enquiries regarding the
syllabus change (only) should be directed towards Elizabeth Blount,
Secretary to the Joint Insolvency Examination Board, C/o The Institute
of Chartered Accountants in England & Wales, Learning &
Professional Development, Metropolitan House, 321 Avebury Boulevard, Milton Keynes, MK9
2FZ; telephone: +44 (0) 1908 248 309; email: elizabeth.blount@icaew.com.
Enquiries regarding examination entry and registration should be
addressed to the appropriate Recognised Professional Body, and NOT to
the above contact. General enquiries may be directed to IPPolicy.Section@insolvency.gov.uk; Telephone: 020 7291 6772 36. Launch of Investigations and Enforcement Services (IES) A new business has been created within the Insolvency Service which comes into being on 1 January 2009. Investigations and Enforcement Services (IES) brings together the current businesses of Investigations, Enforcement and Companies Investigation Branch to form a national investigation and enforcement structure which will be headed by Robert Burns, currently Inspector of Companies. The IES vision going forward encapsulates the delivery of an efficient and flexible investigation and enforcement capability by professional, trained and motivated teams – targeting outcomes that reflect the public interest, promoting fair markets and engaging with our stakeholders in order to maximise our impact. The creation of IES represents the implementation of one of a number of recommendations made by Grant Thornton, who were contracted to conduct a review of the Insolvency Service’s investigation and enforcement activity. Grant Thornton’s report, which was published on 4 July 2008, was positive about the quality of investigation and enforcement operations across the Insolvency Service, referring to “an experienced and committed workforce, that effectively discharge their remit.” One of the principal recommendations was that the Service should organise investigation and enforcement activities so that they could be conducted in the most unified, effective and efficient way possible. The creation of IES will achieve this. Priorities for the new business include:
“This is an exciting time for the Service”, according to Stephen Speed, Inspector General and Agency Chief Executive, who states “the establishment of IES marks a major step forward. The new business, which will work seamlessly with Official Receivers Services, makes the most of the Service’s skills and talents for investigation and enforcement work in delivering for our customers. Our vision going forward is of a vibrant, outward looking and ambitious organisation that engages with and is responsive to the concerns of our stakeholders.” Any enquiries regarding the above should be directed towards Gay Burns or Clare Quirk, Investigations and Enforcement Services; telephone: 020 7596 6130/0151 625 2153 email: gay.burns@BIS.gsi.gov.uk or, clare.quirk@insolvency.gov.uk 37. JIEB Examiner and moderator vacancies The Joint Insolvency Examination Board (JIEB) exams consist of a set of practical and technical examinations which all licensed insolvency practitioners are required to pass. Examiners and moderators responsible for setting, marking and moderating the examinations are drawn from the insolvency profession. The fees paid to examiners and moderators provide a useful additional income but are not sufficient to cover the time spent on a normal professional charge basis. However, appointment to an examining team has important additional benefits for the individual and firm. JIEB is constantly in need of new team members and if you or anyone in your firm wish to consider applying for such a role, you are encouraged to contact JIEB for further information as soon as possible. Any enquiries regarding this article and for further information about the roles should be directed towards Pauline Cozens, JIEB, 321 Avebury Boulevard, Milton Keynes MK9 2FZ. Telephone: 01908 248 204, email: Pauline.Cozens@icaew.com 38. Publication of Annual Review of Insolvency Practitioner Regulation and Report on the operation of SIP 16 The Insolvency Service has published the first annual review of insolvency practitioner regulation, which is now available on our website. The review sets out the essential features of the regulatory regime that governs insolvency practitioners; what the public and businesses can expect from it, and what The Insolvency Service and the other regulators are doing to improve it. In addition, a report on the first six months operation of SIP 16, which is concerned with the disclosure of information in pre-pack administrations, has also been published. This sets out the key findings of our monitoring of information provided by insolvency practitioners pursuant to SIP 16 and indentifies those areas where compliance with the SIP may be improved. It is anticipated that a further report will be published in early 2010. The Annual Review of Insolvency Practitioner Regulation is available here: http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/iparea/INS_Practitioners.pdf The Report on the first six months operation of SIP 16 is available here: http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/policychange/sip16-final.pdf Enquiries regarding this article should be directed towards IP Policy Section, Area 3.6, 21 Bloomsbury Street, London, WC1B 3QW; telephone: 020 7291 6772; email: IPPolicy.Section@insolvency.gov.uk 39. Securing chip and PIN devices in insolvency proceedings The UK Cards Association (the trade association representing all the major credit, debit and charge card issuers) plays a leading role in preventing card fraud and is keen to work closely with insolvency practitioners. Having been previously responsible for the introduction of chip and PIN, The UK Cards Association is keen to help ensure that chip and PIN devices are securely managed during each stage of the insolvency process. SOCA (Serious Organised Crime Agency) is also supporting The UK Cards Association in this endeavour. Since its introduction back in 2003, chip and PIN has had a major impact on tackling card fraud in the UK. However as fraudsters have found it increasingly difficult to commit particular types of fraud, they have started to explore other avenues for obtaining cardholder data, one of which is through chip and PIN devices that are used in retail shops and stores for accepting card payments. In recent years the banking and retail industries have seen a number of cases where criminal gangs have targeted chip and PIN devices. These gangs tamper with the internal circuitry of the chip and PIN device and then seek to reintroduce them into retail sites. This allows the fraudster to capture card (magnetic stripe) and PIN data which is subsequently used to create magnetic stripe clones of genuine cards for fraudulent use overseas in countries that have not yet deployed chip and PIN. This activity is clearly of considerable concern to us all. It is known that fraudsters will go to considerable lengths to obtain chip and PIN devices. Examples that have been seen range from committing theft at retail sites to the purchasing of these devices from internet merchants such as eBay. Due to the recent economic difficulties, a large number of household retail names have entered insolvency proceedings. The potential availability of large numbers of redundant devices when such retailers go out of business is of considerable concern to the banking industry. Therefore it is important that these devices are dealt with in a safe and secure way when a business is closed. There is a particular risk that these devices might be stolen by unscrupulous retail or landlord nominated staff at the early stages of an insolvency process. Therefore extra care is needed in handling these devices from the very early stages of a process. There is also a potential reputational risk to insolvency practitioners if these devices are not handled safely and securely and end up in the hands of the wrong people. The UK Cards Association has provided some information on the Card Watch website for insolvency practitioners under the retail section FAQ’s. In order to access the website and the information, please follow the link below: http://www.cardwatch.org.uk/faqs.asp?sectionid=1&fgid=41&Title=insolvency_practitioners_chip_and_PIN. Any enquiries regarding this article should be directed towards: cardwatch@apacs.org.uk 40. Launch of a guide for debtors’ advisors – “In Debt? Dealing with Creditors” The Insolvency Service has launched a new guide to debtors and debt advisors, entitled ‘In Debt? Dealing with your creditors.’ The guide contains an overview of the main debt solutions, not just those administered by The Insolvency Service, and addresses what we believe to be a gap in the literature currently available to debtors from all sources. The guide includes the following:
The guide has been produced in conjunction with the IVA Standing Committee, which includes representatives from many sectors of the insolvency world, including R3, IPA, ICAEW and IPC, as well as debt advice organisations, creditor bodies and insolvency practitioners. The Insolvency Service has also consulted with other organisations, including Government, regulatory and charitable organisations, and we are grateful to them all for their valuable input. The Guide is available electronically to all advice agencies, and insolvency practitioners. It is also on The Insolvency Service website from where it can be accessed and downloaded. The Guide is badged with The Insolvency Service logo and signposts Government funded advisers for debt advice. The Guide is also available in word format. To request a copy of the word version, together with our standard terms and conditions for its use, please contact Policy.unit@insolvency.gov.uk . Hard copies of the Guide are available on request, and it is available online at: http://www.insolvency.gov.uk/pdfs/guidanceleafletspdf/indebt-web.pdf Any enquiries regarding the above should be directed towards Karol Sanderson, Policy Unit, 3rd Floor, 21 Bloomsbury Street, London WC1B 3QW; e-mail: Lynda.Copson@insolvency.gov.uk General enquiries may be directed to Policy.unit@insolvency.gov.uk; Telephone: 020 7291 6740 41. Project for Modernisation of the Insolvency Rules - Update Following the introduction of the new modernised insolvency advertising regime on 6 April 2009, The Insolvency Service is proceeding with the preparation and delivery of the remaining modernisation changes identified for the Insolvency Rules which are planned to come into force on 6 April 2010. Thereafter, all amendments to the Insolvency Rules will be taken into a new set of Rules which are planned to come into force on 6 April 2011. The further modernisation proposals planned for April 2010 are subject to the successful passage of a Legislative Reform Order (LRO) that is currently going through the Parliamentary process. This will make necessary changes to the Insolvency Act to allow the Rules to provide for matters such as e-delivery of insolvency notices and the use of websites for sending reports and other documents to creditors. We have recently sent a draft of the modernisation changes proposed for April 2010 to the Insolvency Rules Committee, who are required to be consulted on amendments to the Rules before they are laid before Parliament. The expectation is that they will have completed that consideration and signed off the amendments by the end of November 2009 to enable the Rules to be made early in the New Year, a few months before they are planned to come into force on 6 April 2010. Policy officials are keen to help the insolvency profession and other stakeholders prepare for what will be a substantial raft of changes coming into force in April 2010. With this in mind, The Insolvency Service is preparing a version of the current Insolvency Rules as if they had been amended by the proposed amendments planned for April 2010. This is expected to be published on The Insolvency Service’s website by early September 2009 and will contain tracked changes highlighting the amendments. To the extent that it has been possible, this document will reflect those suggestions that stakeholders have made to our earlier consultations. Given the timeframe for delivery of the Rules amendments, the version that will be published should not be seen as a further consultation but as an aid to planning for the modernisation changes. To provide further assistance to stakeholders, The Insolvency Service is planning to hold a stakeholder conference at 21 Bloomsbury Street, London during the afternoon of Wednesday 14 October 2009 to discuss and explain the nature of the principle modernisation changes proposed for April 2010. Invitations will be sent out over the next month and numbers will be restricted. However, should any practitioners or interested persons wish to be added to the invitation list please feel free to contact us at the address below. Any enquiries regarding the above should be directed towards Neil Ogilvie, Policy Unit, Zone B, 3rd Floor, 21 Bloomsbury Street, London WC1B 3QW; e-mail Neil.Ogilvie@insolvency.gov.uk 42. Consultation on Debt Management Schemes On 18 September the Consultation Paper “Debt Management Schemes - delivering effective and balanced solutions for debtors and creditors” was issued. This is a joint consultation between the Ministry of Justice, the Department for Business Innovation & Skills (BIS) and The Insolvency Service. The consultation is aimed at all those with an interest in providing options to help the over-indebted, debtors with multiple debts in England and Wales and their creditors. In considering whether action is required, the Consultation Paper is guided by the following objectives:
The options considered in the Consultation Paper are:
The consultation and accompanying initial Impact Assessment pose a number of questions, the responses to which will assist in determining future policy in this area. The consultation period ends on 18 December 2009 and the full Consultation Paper, initial Impact Assessment and details of how to respond can be accessed on.http://www.justice.gov.uk/consultations/debt-management-schemes.htm Any enquiries regarding this article should be directed towards Andy Woodhead, telephone: 0207 291 6738. Email: Andy.Woodhead@insolvency.gov.uk General enquiries may be directed to Policy.unit@insolvency.gov.uk; Telephone: 020 7291 6740 43. Statistics on insolvent individuals by geographical location For the first time in July 2009, the Insolvency Service published on its website the number of bankruptcy orders and individual voluntary arrangements by region and local authority. The information is available on an annual basis covering the period 2000 to 2008 and will continue to be updated annually. The publication of this information is only made possible by the continued high quality of address information provided by bankrupts and insolvency practitioners in their returns to the Insolvency Service. The figures can be seen via the link here: http://www.insolvency.gov.uk/otherinformation/statistics/regionalstatisticsmenu.htm Any enquiries regarding this article should be directed towards Gary Mills, Policy Unit, Zone B, 3rd Floor, 21 Bloomsbury Street, London WC1B 3QW. Email: gary.mills@insolvency.gov.uk General enquiries may be directed to email policy.unit@insolvency.gov.uk 44. Publication of Insolvency Guidance Paper – ‘Dealing with complaints’ The above Insolvency Guidance Paper (“IGP”) has recently been published and offers guidance to insolvency practitioners as to matters which they may consider when dealing with complaints. The IGP is available on The Insolvency Service website at the link below: IGP%20Complaints%20with%20header_final%20011009.doc General enquiries may be directed towards IP Policy Section, 3rd Floor Zone B, 21 Bloomsbury Street, London, WC1B 3QW; telephone: 020 7291 6772; email: IPPolicy.Section@insolvency.gov.uk 45. Administrative bankruptcy orders and removal of early discharge Responses to The Insolvency Service’s 2007 consultation on reforming the debtor bankruptcy petition process revealed clear support for the idea of bankruptcy orders being made administratively. On 13 November 2009 we launched a further consultation setting out detailed proposals for a new route into bankruptcy, based on debtors making an application directly to an official, either electronically or through the post. Stephen Speed, Chief Executive of The Insolvency Service, said: "The recent digital expansion of government services has provided an excellent opportunity for The Insolvency Service to look at how we can best deliver value to our service users. A new administrative process would create a more modern, efficient and appropriate entry route into bankruptcy while allowing the courts to focus their resources on matters that rightly require judicial intervention, such as resolving disputes." Already over 94% of those petitioning for their own bankruptcy seek advice prior to accessing bankruptcy. We want to build on this and propose using prompts and pop up messages in the on-line application process to encourage debtors to seek advice as early as possible. We also want to ensure that bankruptcy remains a serious regime. Bankruptcy is more than just an appearance at court, and we are not proposing any changes to the process after the order is made. We will provide the information to make sure that applicants are fully aware of the consequences of bankruptcy before they proceed. The consultation also considers the removal of the early discharge provision, which enables some bankrupts to be discharged from bankruptcy in less than one year. With the cost of administering early discharge proving greater than the benefits to the debtor, to creditors or to The Insolvency Service, the removal of this discretionary provision would in our view be beneficial. The consultation document is available to view on our website at www.insolvency.gov.uk. Tell us what you think at policy.unit@insolvency.gov.uk by 8th February 2010. Any enquiries regarding this article
should be directed towards General enquiries may be directed to policy.unit@insolvency.gov.uk. Telephone: 020 7637 1110 46. Searches of the Consumer Direct database – agreement with OFT The Office of Fair Trading (‘OFT’) has implemented a gateway for requesting searches of the Consumer Direct database in all insolvency cases. Previously, insolvency practitioners have been able to make requests for searches directly, but OFT became aware that some of the requests they received were not from authorised insolvency practitioners. OFT have therefore decided to involve The Insolvency Service as the gateway to ensure that only valid requests are made. An insolvency practitioner is able to request a search of the Consumer Direct database when they are acting as trustee or liquidator and making enquiries into the affairs of an insolvent business. The database holds details of any complaints made against or enquiries into trading businesses. The OFT will now supply specific information about a particular complaint. To obtain information insolvency practitioners acting as either liquidator or trustee will have to complete a form entitled ‘Request Form for Consumer Direct Information Only’. The Form and the Guidance Notes for use are available on The Insolvency Service website at the following link: Request%20form%20and%20Guidance_V1%201.doc%202003%20Version%20IP's.doc The Form contains a box entitled ‘Enactment(s) under which functions or duties are being pursued’. This should be completed by the insolvency practitioner detailing the relevant section of either Companies Act 2006 or the Insolvency Act 1986 that enables them to make enquiries. There is provision on the Form for stating the name of the company for which information is requested and whether the complainant’s details are required. The Form should be completed electronically and be sent to the Official Receiver Operations ‘Appointed Contact’. The form will then be forwarded to the OFT who manage the Consumer Direct database. Details of the appointed contact are provided below. When the OFT undertakes to provide the information, it will endeavour to do so within 20 days of receiving the request. Any enquiries regarding this article should be
directed towards General enquiries may be directed to ORBS@insolvency.gov.uk 47. Publication of consultation on pre-pack sales in administration The Insolvency Service has published a consultation document and called for evidence on improving the transparency of, and confidence in, pre-pack sales in administration. The publication of the consultation follows widespread concerns that have been expressed about the pre-pack process and seeks views on a number of possible options for change. The consultation document is available to view on our website at the following link: Responses to the consultation should be sent to ippolicy.section@insolvency.gov.uk by 24 June 2010. General enquiries may also be directed to IPPolicy.Section@insolvency.gov.uk Telephone: 020 7291 6772 48. Insolvency Statistics: New Personal Insolvency Statistics & User Engagement Consultation Official Statistics showing personal insolvency rates by region and updated individual voluntary arrangement (IVA) completion and failure rates, including those for 2009, have been published. Regional figures for bankruptcies, IVAs and Debt Relief Orders (since 6 April 2009) for 2000 to 2009 are available on the statistics section of The Insolvency Service website, which can be found at the link below: http://www.insolvency.gov.uk/statistics These figures include the rates per 10,000 of the adult population, as well as a break down for each procedure to local authority level. Updated statistics showing the proportions of IVAs registered in each year since 1987 that have completed, failed or are ongoing have also been published on The Insolvency Service website. These statistics update those first published in December 2009 and show the status of IVAs as of May 2010. The Insolvency Service Statistics team has launched a user engagement consultation, to run from 26 July to 18 October 2010. We are interested in hearing your views about how you use our statistics and how you think we could improve them. Further information regarding this consultation can also be found on the statistics section of The Insolvency Service website.
Any enquiries regarding these official statistics
should be directed towards General enquiries may be directed to: insolvency.enquiryline@insolvency.gov.uk Telephone 0845 602 9848. 49. Publication of OFT report ‘The Market for Insolvency Practitioners in Corporate Insolvencies’ The Office of Fair Trading (OFT) published the above report on 24 June 2010 which is available on their website at the link below: http://www.oft.gov.uk/shared_oft/reports/Insolvency/oft1245 The report will now be considered by The Insolvency Service and others in order to inform the Government’s response. Previous practice has been to publish a response to OFT reports containing recommendations to Government within 90 days. In considering the report BIS and The Insolvency Service will work closely with other relevant Government departments, the Recognised Professional Bodies and other parties with an interest in insolvency. If any recommendations are subsequently taken forward there is also likely to be a further period of consultation. General enquiries may be directed to IPPolicy.Section@insolvency.gov.uk Telephone: 020 7291 6772 50. Debtor petition reform and Official Receiver automatically becoming trustee: Publication of consultation responses Debtor Petition Reform and Early Discharge The summary of responses to the consultation on debtor petition reform and early discharge is now available to view on our website. In a written statement to Parliament made in October 2010, Minister Edward Davey said: “It is clear from the responses that interested parties see benefits in removing the court from the process in circumstances where it is unnecessary for a court to take a decision. The Insolvency Service will be exploring with Ministry of Justice and HM Courts Services how best to realise those benefits to produce a bankruptcy system that is suitably accessible and affordable, as well as providing an efficient service for all those who need to use it. I expect that this work will result in enhanced and detailed proposals being published in due course. There was also support for repeal of early discharge. This requires primary legislation, and will therefore be brought forward when Parliamentary time allows.” The consultation, which ran between November 2009 and February 2010, gave specific consideration to the concept of a bankruptcy order on a debtor’s petition being made administratively by an official appointed by the Secretary of State, rather than being made by the court. The consultation paper welcomed views on the detail of what this new bankruptcy application process might look like, and we are grateful to all those who took the time to respond to the proposals. The official receiver becoming trustee on the making of the bankruptcy order and the removal of the requirement to file a ‘no meeting’ notice in some company compulsory winding up cases In March 2010 we also invited views on our proposals for the official receiver to become trustee of the bankrupt’s estate on the making of the bankruptcy order, and to remove the requirement to file a ‘no meeting’ notice in certain company compulsory winding up cases. The responses to that consultation, which closed on 31st May, together with a revised impact assessment, have now been published and are available to view on our website at the link below: We are again very grateful to all those who responded to the consultation. The views expressed have helped formulate the final policy intentions, which are to: 1. Allow for the official receiver to become the first trustee on the making of the bankruptcy order, thus removing the need for the current notice of ‘no meeting’ to be sent to creditors and to be filed at court; and
2. In all compulsory liquidation cases, remove the requirement for the official receiver to issue a notice of ‘no meeting’ to creditors or file such notice at the court.
As with the proposals for the removal of early discharge, those for the official receiver to become trustee on the making of the bankruptcy order and to remove the requirement to file ‘no meeting’ notices in all compulsory and bankruptcy cases will be taken forward when Parliamentary time permits. Any enquiries regarding this article should be directed towards Maria Isanzu, 21 Bloomsbury Street, London WC1B 3SS. Telephone: 020 7291 6733 email: maria.isanzu@insolvency.gov.uk General enquiries may be directed to policy.unit@insolvency.gov.uk Telephone 020 7637 1110. 51. Changes to the London Bankruptcy Jurisdiction With effect from 6 April 2011 the Insolvency Rules 1986 were amended by The Insolvency (Amendment) Rules 2011 ( SI 2011/785) to require lower value bankruptcy cases allocated to the London insolvency district to be presented to and heard by the Central London County Court rather than the High Court of Justice. The London Insolvency District (Central London County Court) Order 2011 (SI 2011/761) has given jurisdiction to the Central London County Court for personal insolvency proceedings. Generally speaking, the proceedings which will be dealt with by the Central London County Court are creditor petition bankruptcies (including those presented by Government Departments) where the petition debt is less than £50,000 and debtor petition cases where the unsecured liabilities set out in the statement of affairs attached to the petition are less than £100,000. There are cases where, notwithstanding these monetary limits, the proceedings will continue to be presented in the High Court:-
From a practical viewpoint any change in process, especially in the short-term, will be negligible because bankruptcy petitions will continue to be administered by officials in the Thomas More Building at the Royal Courts of Justice. Later in the year it is proposed that bankruptcy petitions issued in the High Court will be dealt with in a new High Court building (the Rolls Building) which is due to open in October 2011. The changes to the Insolvency Rules apply where a bankruptcy petition is presented on or after 6 April 2011, except where the petition is pursuant to a statutory demand to which Rule 6.4(2A) applies in which case they apply where the statutory demand is dated on or after 6 April 2011. The High Court will also have discretion to transfer proceedings allocated to it prior to 6 April 2011 to the Central London County Court. The rule changes also provide for the allocation of applications to the court in debt relief proceedings under Section 251M and 251N of the Insolvency Act 1986 and apply where the first application is made on or after 6 April 2011. As well as the principal legislative changes some minor changes will be made to statutory forms 6.1, 6.2, 6.3, 6.7-6.10 and 6.27 (forms for statutory demands, creditor petitions and debtor petitions). Amended versions of these forms will be made available on the Insolvency Service website. A link to The Insolvency (Amendment) Rules 2011 has been included on the Insolvency Service website at: http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/legislation/uk/legislation.htm Any enquiries regarding this article should be directed towards Tom Phillips, Zone B, 3rd Floor, 21 Bloomsbury St, London WC1B 3QW telephone: 0207 637 6421 email: tom.phillips@insolvency.gov.uk General enquiries may be directed to email: Policy.unit@insolvency.gov.uk Telephone 0207 291 6740 52. Statements of Insolvency Practice (SIPs) – review and updating At the meeting of the Joint Insolvency Committee held on 20 June 2011, the Recognised Professional Bodies, the Insolvency Service and the Insolvency Service Northern Ireland agreed that, as an interim measure pending issue of revised SIPs, certain provisions of SIP 3 and SIP 9 should be relaxed to allow for changes in practice. SIP9 is currently under review and SIP3 has been identified for review shortly. The details are: SIP 3 Paragraph 3.8 requires that a copy of the R3 booklet “Is a voluntary arrangement right for me?” to be sent to debtors. However, it is now common practice (and expected by OFT) for debt management companies to provide the Insolvency Service booklet “In debt – dealing with your creditors”. As a result, there could be circumstances where a debtor receives both booklets. It has been agreed that it would be appropriate for either booklet to be used by insolvency practitioners. SIP 9 In certain circumstances, where an office-holder is replaced or where an office-holder takes a sequential appointment (for example, if a CVL follows administration), further approval is not required for the basis of remuneration. The way in which Category 2 disbursements are approved is, of course, separate and, in the circumstances described, under the current SIP further approval would be needed for these disbursements. It has been agreed that if an office-holder has obtained approval for the basis on which a charge for Category 2 disbursements is made, that basis may continue to be used where further approval of the basis of remuneration is not required. The position of insolvency practitioners With immediate effect, the Secretary of State and the Recognised Professional Bodies will interpret SIPs 3 and 9 for monitoring purposes as if they had been amended to take account of the above matters. General enquiries may be directed to IPPolicy.Section@insolvency.gov.uk Telephone: 020 7291 6772 53. Consultation: Reform of the process to apply for bankruptcy and compulsory winding up Government announced a public consultation on 7 November 2011 about proposals to reform the way people access bankruptcy and compulsory winding-up – both in respect of petitions presented by debtors (the subject of previous consultations in 2007 and 2010*) and those presented by creditors and third parties. The proposals about winding-up relate specifically to petitions on grounds of inability to pay debts and that the company has passed a special resolution for compulsory winding-up. * The previous consultations can be accessed by clicking the following links: Initialstageconsultationpaper.doc Debtor%20Petition%20Reform%20Final%20Nov%2009.pdf) The vast majority of creditor petitions are not contested at a court hearing, so the aim is to provide a streamlined administrative route where there is no dispute between the parties. Court focus would then be on the more complex cases that rightly require detailed consideration. A new pre-application process would require creditor applicants to demonstrate that they have taken all reasonable steps towards reaching a mutually satisfactory solution to the debt problem, before instigating proceedings. Debtors would be encouraged to seek early, free, independent advice. This reflects Government’s desire that people are empowered to make the right decisions for themselves about their finances. The earlier a debtor seeks advice, the more likely it is that they will be able to make a constructive proposal to their creditors. Where a creditor wishes to proceed with an application, this would be made to a new office of the Adjudicator, based within The Insolvency Service. This office would also receive debtor applications for bankruptcy. Debtors would have an option to pay both the application fee and Official Receiver’s deposit by instalments, although full payment would have to be made before their application could be considered by the Adjudicator. More streamlined access would lead to greater efficiencies; quicker access, where appropriate; a facility to apply on-line; and lower application fees. The level of safeguards is an important part of the proposals – so that there are better outcomes for debtors whilst creditors’ rights are respected. The consultation document can be found on our website at: http://www.bis.gov.uk/insolvency. Responses should be sent to: policy.unit@insolvency.gov.uk by 31 January 2012. Any enquiries regarding this article should be directed towards Maria Isanzu telephone: 0207 291 6733 email: Maria.isanzu@insolvency.gov.uk
General enquiries may
be directed to email
Policy.unit@insolvency.gov.uk 54. The closure of the Insolvency Practices Council (IPC) This article notifies insolvency practitioners that the IPC has been disbanded with immediate effect. The closure of the IPC follows recommendations contained within the Office of Fair Trading’s report of June 2010 into the market for corporate insolvency and the subsequent Government response to the consultation on reforms to the regulation of insolvency practitioners. The IPC was set up in 2000 as an independent external body with a remit to investigate and examine the ethical and professional standards of the insolvency profession and to make recommendations to the bodies that regulate the profession for any changes in regulation it considers are needed in the public interest. It made a number of recommendations over the years which have been adopted; two of particular note were the provision of better information and advice for debtors in respect of IVAs and other debt solutions and changes to the treatment of the matrimonial home in bankruptcy. Copies of the IPC’s most recent annual report and March 2012 newsletter to insolvency regulators and practitioners can be accessed via the webpage on the IPC contained on The Service’s part of the BIS website, the link to which is http://www.bis.gov.uk/insolvency/insolvency-profession/Regulation/recognised-professional-bodies/IPC
Any enquiries regarding this article
should be directed towards Steve Lamb General enquiries may be directed to email: IPPolicy.Section@insolvency.gov.uk; Telephone: 020 7291 6772 55. Launch of Public Consultations on proposed closures of Insolvency Service offices in Bournemouth Medway and Stockton On 27 March 2012 The Insolvency Service issued public consultations on the proposed closures of our offices in Bournemouth, Medway and Stockton. The purpose of the consultation is to gather further information and comments from the public and stakeholders about the impact of the three proposed office closures. The views expressed and information received from the consultation will become part of the evidence that The Insolvency Service will use to decide whether or not to close an office. The Insolvency Service is largely fee-funded from insolvency case deposits and asset realisations. Bankruptcy cases reached record levels in 2009 but have since fallen very substantially. That fall means that The Service must reduce its costs and become more operationally flexible in the future. Following consultations with staff, Trade Unions, and key stakeholders during the summer of 2011, The Service announced a planned re-organisation and a reduction in the size of its office network (the Delivery Strategy). The re-organisation will lead, over time, to a new, more centralised approach to delivering most services which will reduce costs and provide greater flexibility to adapt in future to increases and decreases in workload. The proposed closure of the three Insolvency Service offices mentioned above is one of the early stages of implementing The Service’s longer term plans. All staff in the three proposed offices will be offered posts in their nearest alternative Insolvency Service office. The Service does, however, acknowledge that not all of its staff in these offices will be able or willing to take up the posts offered for either personal or practical reasons. The number of customers affected by these proposals is predominantly limited to those bankrupts or company officers whom The Insolvency Service require to have a face to face interview. (These will in general be people where The Service has some concerns about, for instance, limited information, their conduct or the security of assets.) The number of such people who would be affected is relatively small and in the majority of cases they are likely to be required to attend for interview on only one occasion. Further analysis and details of estimated volumes of face to face interviews for each location are set out in the public consultation documents. As is current practice, The Insolvency Service remains committed to ensuring that reasonable adjustments are made for customers who have accessibility issues or special requirements. Please see the Equality Impact Assessment for further details in regards to this. The public consultation started on 27 March 2012 and will close on 22 June 2011. The public and stakeholders can send their feedback to Delivery.Strategy@insolvency.gov.uk. The public consultation documents can be found here http://www.bis.gov.uk/insolvency/news/news-stories/2012/Mar/public-consultations. The Insolvency Service welcomes your views. Any enquiries regarding this article should be directed towards Tony Ryan, head of Strategy and Research, The Insolvency Service, 21 Bloomsbury Street, London WC1B 3SS telephone: 020 7291 6750, email: tony.ryan@insolvency.gov.uk 56. Investigation Hotline Publication The leaflet formerly know as “The Enforcement Hotline” has been updated and expanded to reflect the changing remit of The Insolvency Service’s hotline team. The publication details current complaint routes and has been renamed “What is the investigations hotline?” Practitioners may find the publication useful either when reporting matters unconnected to their statutory duties, or to provide information to the public about complaint routes in circumstances where the complaint is not connected to their role as office holder. In particular the hotline now aims to capture;
Where an Official Receiver or insolvency practitioner is in office then the hotline encourages the complainant to contact the office holder, but will receive (& forward) complaints addressed to it when necessary. The publication provides a guide to the various methods of complaint and a complete list of various contact points depending on the nature of the complaint. The publication is now available online only and further information about the hotline is available on our website (this information is currently being upgraded to reflect the publication and to make the site more user friendly). You can obtain copies of this new publication from, and refer any enquiries to, The Insolvency Service’s website: The Insolvency Service | BIS Any queries or comments regarding this notice should be sent to intelligence.live@insolvency.gov.uk 57. Rejection notices post submission of a section 120 notice to the Pension Protection Fund The Pension Protection Fund (PPF) intend to stop sending formal rejection notices to insolvency practitioners following the submission of a section 120 notice if the scheme is not an eligible defined benefit scheme, as it is not a statutory requirement under the Pensions Act 2004. However, as long as practitioners provide their email address when submitting their section 120 notice, the PPF will send an email informing practitioners if the notice refers to an ineligible scheme. The PPF will allow practitioners to supply an email address by revising both the section 120 notice and the website which allows the submission of forms electronically. Until these changes are made, the current procedures will remain in place. It is estimated that the new system should be operational by 1 September 2012.
Any enquiries regarding this article should be directed towards Joseph
Sullivan of IP Regulation Section, telephone: 020 7637 6495, General enquiries may be directed to email: IPRegulation.Section@insolvency.gov.uk , Telephone 020 7291 6772 58. Insolvency legislation to be reviewed in the Red Tape Challenge The Red Tape Challenge (RTC) is an ambitious, pan-Whitehall programme to reduce and improve the stock of regulation on the statute book, drawing on comments made by business, civil society organisations and the public. The programme is led by the Cabinet Office and BIS (The Insolvency Service’s parent department), and aims to root out unnecessary, overcomplicated regulation that strangles business and economic growth. Regulations are grouped in themes and each theme is featured on the Cabinet Office’s RTC website for a period of five weeks, during which people are able to say whether the regulations should be scrapped, simplified or achieved in a non regulatory or less bureaucratic way. Being a major plank of the Government’s deregulatory agenda it is likely to attract widespread media attention during at least part of the live period. The insolvency theme will be launched later this summer. During the five weeks following the launch stakeholders and the public will be able to comment on 111 insolvency ‘regulations’. These regulations are the primary and secondary legislation that sets out the how insolvency procedures work, the obligations of insolvency office-holders and the disqualification regime. The regulations include the Insolvency Act 1986, the Insolvency Rules 1986, and the various amendments made since their enactment – however, Fees Orders are out of scope. A full list of the insolvency regulations that will be included in this exercise will be published on the Cabinet Office website at http://www.redtapechallenge.cabinetoffice.gov.uk/home/index. Much of the amending legislation already falls within the existing project to consolidate and modernise the Insolvency Rules. To ensure that comments made as part of the RTC are taken into account in the Insolvency Rules project, it is now unlikely that a formal consultation on the draft Rules will be issued before 2013. The Insolvency Service has invited Philip King, CE of the Institute of Credit Management, to act as the Sector Champion for insolvency – representing the interests of those who can be expected to benefit from regulation, and acting as a link between the sector and Government. Once the theme window closes, The Insolvency Service will produce a set of proposals on regulatory reform, which are then reviewed by a Ministerial ‘Star Chamber’ with the presumption that all burdensome regulations will go unless Departments can justify why they are needed – well-defined and necessary regulation will be kept. Progress on each theme is available on the Cabinet Office website and in addition we will announce future progress both in Dear IP and on the Insolvency Service website. Insolvency Practitioners will clearly have their own views on and hands on experience of the various pieces of insolvency legislation and so we would be pleased to receive your comments. Comments can be made publicly on the Cabinet Office website or privately by emailing redtapechallenge@cabinet-office.gsi.gov.uk. More information about the RTC is available at: http://www.redtapechallenge.cabinetoffice.gov.uk/home/index/ Any enquiries regarding this article should be directed towards Mike Chapman, The Insolvency Service, Policy Unit, 4th Floor, 4 Abbey Orchard Street, London, SW1P 2HT; telephone: 020 7291 6765, email; Mike.Chapman@insolvency.gov.uk General enquiries may be directed to Policy.Unit@insolvency.gov.uk, Telephone 020 7637 1110 59. The Enterprise and Regulatory Reform Bill Repeal of Early Discharge The Enterprise and Regulatory Reform Bill is currently going through Parliament. It contains a clause which seeks to repeal section 279(2) of the Insolvency Act 1986, commonly known as early discharge. The effect of the repeal is that all bankrupts would be automatically discharged after 12 months providing they are not subject to any restrictions or their discharge has not been suspended. The objective is to reduce the financial and administrative burdens on business and government and make the bankruptcy process in England and Wales as efficient, consistent and transparent as possible and would result in a total net benefit to business of £0.6 million per year. Progress on the bill can be followed by accessing the link below: http://discuss.bis.gov.uk/enterprise-bill/ Any enquiries regarding this article should be
directed towards Muhunthan Vaithianathar, telephone: 020 7637 6515. 60. Update on the Red Tape Challenge ‘Insolvency Theme’ The insolvency theme was in the ‘spotlight’ on the Red Tape Challenge (RTC) website from 23 August to 27 September 2012. Along with publishing 115 regulations on the website, The Insolvency Service issued an information paper, alerted our major stakeholders to the theme, and published articles in newsletters and magazines targeted at insolvency practitioners and repeat creditors from the business community. We also alerted individuals, directors and creditors who received communications from our London Official Receiver office in September to the theme spotlight in order to get ideas from people going through the process. Our sector champion, Philip King, CE ICM, held a workshop with stakeholders at which ideas were discussed that had a broad measure of support from a wide range of stakeholders. Although the theme generated only a small number of online posts and emails via the RTC website, R3, some of the RPBs and legal groups sent in more substantive comments by email during October. The main areas put forward by stakeholders for change were: · greater electronic communication with creditors; · reduce the volume of hard copy information provided to creditors; · remove banking restrictions for some types of insolvency procedures; · reduce the burden on office-holders to maintain records of time spent on a case; · give office-holders discretion not to pay dividends where it was uneconomic to do so, with agreement of creditor; · remove the default of holding physical meetings in insolvency processes; · enable creditors to extend period of administration by 12 months and provide for continuity of supply of IT and other essential goods / services in administration; · allow administrators to disclaim and · reduce the number of the different types of disqualification returns, and simplify the process for reporting to the Secretary of State. · introduction of specialised personal/corporate authorisation for insolvency practitioners and · removal of requirement for insolvency practitioners to obtain ‘sanction’ to commence certain actions. In total we received or generated about 150 ideas, about two thirds of which we think are worth exploring further. The Insolvency Service will now produce deregulatory proposals which will be considered by Ministers in early 2013. More information about the RTC is available at: http://www.redtapechallenge.cabinetoffice.gov.uk/home/index/ Any enquiries regarding this article should be directed towards Mike Chapman, The Insolvency Service, Policy Unit, 4th Floor, 4 Abbey Orchard Street, London, SW1P 2HT; telephone: 020 7291 6765; email: Mike.Chapman@insolvency.gov.uk General enquiries may be directed to Policy.Unit@insolvency.gov.uk; Telephone 020 7637 1110 61. Reform to the Debtor Bankruptcy Process The Government has announced reforms to the debtor petition process and has introduced amendments to the Enterprise & Regulatory Reform Bill presently before Parliament to make the required changes to the Insolvency Act 1986. The reforms will replace the existing court-based entry route into bankruptcy with a modern, administrative process with electronic applications instead being made to an Adjudicator based within The Insolvency Service. The Adjudicator will decide whether or not to make a bankruptcy order by reference to prescribed criteria. Removing debtor bankruptcy petitions from the courts, which are largely uncontested, will free up court resources to deal with matters which do require judicial input. The court will still have a role in hearing appeals and other applications that may be made to it during the bankruptcy process and will also continue to hear bankruptcy petitions presented by creditors. There will be no change to the implications of bankruptcy for the debtor. These changes are not expected to be implemented before 2015. Progress of the Bill can be followed on the BIS website at the link below: http://discuss.bis.gov.uk/enterprise-bill/ Any enquiries
regarding this article should be directed towards Tom Phillips at 4th
Floor, 4 Abbey Orchard Street, London SW1P 2HT 62. Insolvency termination clauses The Government has tabled amendments to the Enterprise and Regulatory Reform Bill currently before Parliament to address concerns expressed around suppliers exercising termination clauses on insolvency or demanding 'ransom' payments as a condition of further supply. The amendments to the Bill include a power which, when exercised, would allow IT supplies to be added to the list of supplies which are currently protected under sections 233 and 372 of the Insolvency Act 1986, as well as those supplies of gas, electricity, water and communications services that are not presently. That would mean that providers of such supplies would be unable to make supply after the onset of insolvency conditional on the payment of outstanding charges in respect of the supply given to the business before the insolvency. Such providers may make the supply conditional upon a personal guarantee being given by the office-holder for payment of any charges for that supply. Further powers being taken in the Bill allow provisions to be made that mean certain terms in contracts for essential IT and utility supplies cease to have effect. These contractual terms are those that allow a supplier to terminate or change the terms of the supply as a result of a company entering administration or a voluntary arrangement taking effect, or where a voluntary arrangement in respect of an individual who is or has been carrying on a business is approved. This power will also require certain safeguards to be provided to ensure that suppliers who are obliged to continue supplying the insolvent business are adequately protected. The Government will consult with interested parties later this year before exercising these new powers. The detailed amendments that have been tabled, numbered 84B to 84E, can be accessed via the link below: http://www.publications.parliament.uk/pa/bills/lbill/2012-2013/0083/amend/ml083-ii.htm Any enquiries regarding this article should be directed towards Tom Phillips, 4th Floor, Abbey Orchard Street, London SW1P 2HT. Telephone: 020 7637 6421 email: tom.phillips@insolvency.gov.uk 63. The Insolvency Service is now on twitter The Service’s Press Office has set up a twitter account and we are eager to engage with insolvency practitioners through the social media channel. Twitter has more than half a billion users worldwide. Organisations from all sides of the insolvency industry use the site, such as R3, Moonbeever, the Financial Ombudsman and many more. We tweet as @insolvencygovuk and are encouraging those on twitter to follow us for updates and tweet us about industry issues. We know that many of our stakeholders are users of social media and we hope the channel will provide fresh and useful information about The Service as well as helping us engage with insolvency practitioners in a new way. The Service will tweet policy announcements, statistics and research as well as big wins in enforcement activity. These tweets will generally include a link to more detailed information on our website. We will also tweet alerts when public consultations are launched or are just about to close. We do not intend to respond to every tweet relating to our activity but we plan to engage with as many as possible. Even if we do not reply directly, we will still ensure that any feedback we get from you reaches the appropriate people within the Agency. So, please join the conversation. Any enquiries regarding this article should be directed toward Media Relations Manager Kathryn Montague: kathryn.montague@insolvency.gov.uk To read The Insolvency Service’s twitter policy please go to: http://www.bis.gov.uk/insolvency/contact-us/FOI-Intro/TwitterPolicy 64. Insolvency Red Tape Challenge Information about the launch of the insolvency Red Tape Challenge (RTC) was provided in the July 2012 edition of Dear IP. The programme is led by the Cabinet Office and BIS, and aims to root out unnecessary, overcomplicated regulation. Philip King of the Institute of Credit Managers was the sector champion for this work and led a number of meetings with interested parties to identify possible measures. As a result, a package of deregulatory proposals was developed on which Ministers will shortly be inviting comments. These include:
More information about the proposals can be found on The Insolvency Service’s website at: http://insolvency.presscentre.com/Press-Releases/New-measures-to-streamline-insolvency-regulation-announced-68efa.aspx. Most of the proposals will require amendments to both primary and secondary legislation and a consultation on them will be published soon. Any enquiries regarding this article should be directed towards Mike Chapman, The Insolvency Service, Policy Unit, 4th Floor, 4 Abbey Orchard Street, London, SW1P 2HT; telephone: 020 7291 6765 email; Mike.Chapman@insolvency.gov.uk General enquiries may be directed to Policy.Unit@insolvency.gov.uk, Telephone 020 7637 1110.
65. Insolvency measures announced in the Deregulation Bill The Deregulation Bill, published by the Cabinet Office on 1 July, includes a number of new insolvency measures. These include proposals to:
The draft Bill is published at: https://www.gov.uk/government/publications/draft-deregulation-bill Any enquiries regarding this article should be directed towards Clare Quirk, The Insolvency Service, Policy Directorate, 4th Floor, 4 Abbey Orchard Street, London, SW1P 2HT telephone: 0151 625 2513 email: Clare.quirk@insolvency.gov.uk General enquiries may be directed by email to: Policy.Unit@insolvency.gov.uk 66. Electronic communications with Insolvency Practitioners One of the key facets of the modernisation reforms to the Insolvency Rules which came into force in April 2010 was to facilitate the delivery of documents electronically. This has obvious cost benefits and will also ensure speedier communications. With this in mind, The Service has been considering the appropriate way this could be developed in respect of communications with insolvency practitioners. The initial focus of The Service has been on identifying high volume correspondence sent to practitioners which would more readily be suitable for sending by electronic means. There are, for instances, various letters sent out by our Investigation and Enforcement Services to practitioners on a regular basis. These include reminder letters that are issued prior to the six-monthly expiry period for the submission of conduct returns on directors. A further example is where letters are sent following the receipt of D1 conduct returns to inform practitioners that the cases concerned are not being targeted. Work is currently ongoing to ensure appropriate systems are in place to facilitate this communication. The Service does not therefore have a date when this is likely to be introduced and updates will be provided in future editions of Dear IP. It should be emphasised that the general principle set out in Rules 12A.7 and 12A.10 will apply whereby electronic communications will only be sent where the recipient has consented and has provided an electronic address. It would assist if those practitioners interested in receiving communications in this format could supply their names together with the email address they would like to use to: Dear.IP@insolvency.gov.uk.
Any enquiries regarding this article should be directed towards Steve
Lamb of IP
Regulation Section, telephone: 020 7637 6698, General enquiries may be directed to email IPRegulation.Section@insolvency.gov.uk; Telephone 020 7291 6772 The draft Deregulation Bill contains a number of measures of interest to insolvency practitioners and has recently been subject to pre-legislative scrutiny. The report of the Parliamentary Joint Committee has just been published and can be found at: http://www.publications.parliament.uk/pa/jt201314/jtselect/jtdraftdereg/101/10102.htm The Bill contains measures aimed at withdrawing the Secretary of State from the role of directly authorising insolvency practitioners, and introducing the concept of specialised authorisation for those practitioners wishing to focus purely on either personal or corporate insolvency. The aim of the latter measure is to reduce unnecessary regulation and cost which can be barriers to entering the profession. For example, those wishing to specialise and practice only in personal insolvency would no longer have to pass papers on corporate insolvency before getting their qualification. Once qualified, they would of course only be able to practice in their chosen specialism. Further updates will be provided on the progress of the Bill, but in the meantime if you would like to comment on any of the measures please contact: Mike.Chapman@insolvency.gov.uk. General enquiries regarding this article may be directed to email: Policy.Unit@insolvency.gov.uk; Telephone: 020 7291 6772 68. Future Communications with Insolvency Practitioners The Service is currently reviewing the way in which it communicates directly with insolvency practitioners via Dear IP. The Service is keen to maintain regular dialogue with the profession and going forward all articles that would previously have formed part of a quarterly Dear IP issue will be published centrally on the new Government website. Articles will be separated between those which contain technical updates or guidance requirements from those which serve as an update of a more general nature. The Service will communicate with practitioners on a monthly basis via the Dear IP mailbox to inform them of all the new articles issued during the previous month. We are of the view that having more contact with the profession on a monthly basis will increase confidence in the process. There will be additional communications to alert practitioners to headline announcements or key changes. Historical issues of Dear IP will be moved to the new website as part of this process, and The Service will be undertaking a review of older articles and removing those no longer applicable. We would like to receive feedback from insolvency practitioners on these changes together with any other suggestions for improvement. Practitioners can send their comments directly to Dear.IP@insolvency.gov.uk. We would like to receive all feedback by 31 May 2014. This review is part of a general overview of stakeholder engagement by The Service and may take several months to implement fully. Therefore the next proposed issue in June will be in the same format as it is currently and further updates will be provided then. Any enquiries regarding this article should be directed towards Joseph Sullivan 4 Abbey Orchard Street London SW1P 2HT, telephone: 0207 637 6495, email: joseph.sullivan@insolvency.gov.uk General enquiries may be directed to email IPregulation.Section@insolvency.gov.uk 69. Changes to the consumer credit regime from 1 April 2014 The consumer credit regime regulatory landscape is changing from 1 April when the Financial Conduct Authority (FCA) takes over the responsibility for this area from the Office of Fair Trading (OFT). This will result in a number of significant changes for insolvency practitioners. The Government recently amended the legislative framework applicable to the credit activities carried out by insolvency practitioners (the link to the applicable statutory instrument 2014/366 is http://www.legislation.gov.uk/uksi/2014/366/contents/made). Insolvency practitioners have now been excluded (rather than being subject to exemption) from regulation by the Financial Conduct Authority in two specific circumstances:- · Where an individual is ‘acting as an insolvency practitioner’ for the purposes of Section 388 of the Insolvency Act 1986, the exclusion covers the non-credit activities for which insolvency practitioners were previously exempt, in addition to when providing debt counselling, debt adjusting, debt administration, debt collecting and credit information services; · Where an individual is ‘acting in reasonable contemplation’ of an appointment as an insolvency practitioner. Under such circumstances the exclusion only covers the carrying on of debt counselling, debt adjusting and credit information services. An individual will not be acting in reasonable contemplation of an appointment as an insolvency practitioner whenever providing initial debt advice – only where there is a reasonable anticipation of such an appointment. It will therefore be incumbent upon an insolvency practitioner to use his or her professional judgement when considering the particular circumstances of each case to determine whether the exclusion will apply. By way of example, if in the course of providing initial advice an insolvency practitioner advises why it is considered a Debt Arrangement Scheme or debt management plan may not be the most appropriate option then this would not necessarily be outside of the Government’s exclusion if this advice is given in reasonable contemplation of an appointment as an insolvency practitioner. Also, where after considering the debtor’s circumstances it transpires that an insolvency appointment is not appropriate this would not necessarily render the provision of the initial advice outside the scope of the exclusion. This is provided that the initial advice was given in reasonable contemplation of a formal insolvency appointment and that the practitioner did not continue to advise the debtor on entering into a particular debt solution, outside of the scope of the exclusion (e.g. a debt management plan), once it became apparent that such an appointment would not be made. In such circumstances, it is acceptable for an insolvency practitioner to signpost debtors to appropriate alternative sources of advice, such as the Money Advice Service. Debt Arrangement Schemes and debt management plans Carrying on specific debt counselling, debt adjusting, debt collection or credit information services in relation to the provision of Debt Arrangement Schemes (a Scottish debt solution) or debt management plans is not acting as an insolvency practitioner for the purposes of Section 388 of the Insolvency Act 1986 – and consequently not within the scope of the Government’s exclusion for insolvency practitioners. An insolvency practitioner carrying on such activity in relation to a debt management plan or Debt Arrangement Scheme is also considered unlikely to meet the criteria to be able to benefit from an exemption under Part 20 FSMA (the Designated Professional Bodies Regime). This is because the manner of the provision of the insolvency practitioner’s service in the course of carrying on these activities is unlikely to be incidental to the provision of his or her professional services as an insolvency practitioner. The carrying on of, for example, debt counselling or debt adjusting in the course of advising on/administering debt management plans or Debt Arrangement Schemes, is unlikely to constitute carrying on only regulated activities which arise out of, or are complementary to, the provision by an insolvency practitioner of the professional services as an insolvency practitioner to that client. The provision of professional services by an insolvency practitioner will necessarily involve the carrying on of debt counselling/debt adjusting – and for the purposes of Part 20 FSMA, ‘professional services’ are services which do not constitute the carrying on of a regulated activity. Interim permission For those insolvency practitioners that may provide regulated debt advice that does not fall within the scope of the Government’s exclusion, they should consider whether they need to register with the FCA for “interim permission”. Any enquiries regarding this article should be directed towards Steve Lamb of IP Regulation Section, telephone: 020 7637 6698, email: steve.lamb@insolvency.gov.uk General enquiries may be directed to email IPRegulation.Section@insolvency.gov.uk Telephone 020 7291 6772. 70. The Insolvency Service Website On 15 May 2014 our website content transitioned to GOV.UK, the central location for government information and services. Our new corporate page can be found at www.gov.uk/insolvency-service. Our old site has now been redirected and switched off. The GOV.UK website has been designed with users in mind by the Government Digital Service (GDS), so you may notice that much of our content has been rewritten as well as other significant changes. The easiest way to navigate GOV.UK is to use the site search. Any content which cannot be found on gov.uk may be located on the web archive of our old site http://webarchive.nationalarchives.gov.uk/20140311023846/http://bis.gov.uk/insolvency. Content on the new website is driven by what evidence shows our specific user needs to be, or when publication is required via statute. Non-statutory guidance provided elsewhere by other organisations is no longer held on our site. The site and its content will continue to develop over time and we welcome your feedback on what additional information you would like to see, or and any gaps left by the transition. Please contact us at web.admin@insolvency.gov.uk or use the feedback option at the bottom of each page. Further information about the new site and transition You will notice that the way GOV.UK delivers content is very different than before, for example we no longer have tabs for our business areas on our corporate page, and you can no longer browse around our content as you did before. The reason for this is that GOV.UK is designed as a central, consistent point of contact between the public and government, and research has shown that people mostly come to government sites with very specific user needs. The principle aim of the site, therefore, is to fulfil those needs as quickly, simply and clearly as possible with information and guidance broken in to three main types: Mainstream Mainstream Mainstream content pages (written and owned by the Government Digital Service (GDS)) are devoted to meeting the everyday needs of the general public, for example to answer questions like “I want to apply for a passport” or more relevant to us “I want to find out about bankruptcy” or “Complain about a limited company”. In the case of this ‘everyday’ information, research has shown that users are not likely to know where to look for it, and would generally start with a search engine like Google, so in the case of GOV.UK the relevant content is not directly linked to a government department but broken down into broad headings like ‘money and tax’. This is also why the search function on the GOV.UK homepage is ‘front and centre’. Corporate This is the ‘about us, who we are and what we do’ information and the basis of our corporate homepage. Here you will find:
Specialist This content, written by us to strict GDS guidelines, is aimed at our specialist audience, for example insolvency professionals, advisors and engaged members of the public who want more detail than what is provided via ‘mainstream’. What has changed and where are things now The work of the transition to GOV.UK revolved around GDS identifying what our key user needs were by meeting with departments and analysing visitor information (i.e. number of ‘hits’ on individual pages on our old website) and then developing content to meet those needs. This has resulted in some content being archived to the National Archives, and the content that remained being rewritten, or reviewed and edited to meet the GDS Style Guide. This work is ongoing. At the top of our corporate homepage you will see a group of links for our main services and information. These provide links to our key mainstream and specialist content. We will monitor these to ensure that they remain useful to our various user groups. What next We will regularly take stock of the site as it is now and look for development opportunities. We would encourage insolvency practitioners to feedback any issues or common trends coming through that could be served with additional or revised content. We will be arranging for standard letters, guidance publications and other materials to be updated to reflect our new details and any additional information now required consequential to its non-transition from our old site (web address, forms/publication locations etc.) however, all the relevant content on our old site will be redirected so the above will remain functional. General enquiries regarding this article may be directed to: web.admin@insolvency.gov.uk 71. The provision of consumer credit advice and related regulated activities This article has been produced with a view to clarifying the position regarding authorisation for insolvency practitioners – and the applicability or otherwise of the Government exclusion for insolvency practitioners and/or the FCA exemption under Part 20 of FSMA for professional firms that are supervised by a Designated Professional Body (DPB) that meet the relevant criteria. The position as set out in the Dear IP 61 letter issued 31/03/14 is that persons undertaking regulated activities including (but not limited to) debt counselling or debt adjusting require authorisation by the Financial Conduct Authority (FCA), unless they benefit from a relevant exclusion or exemption or are an appointed representative of an authorised firm. Where an individual is ‘acting as an insolvency practitioner’ for the purposes of Section 388 of the Insolvency Act 1986, the exclusion covers debt counselling, debt adjusting, debt administration, debt collecting and credit information services as well as the non-credit activities for which insolvency practitioners were previously exempt. The Government exclusion also covers the situation where an individual is ‘acting in reasonable contemplation’ of an appointment as an insolvency practitioner. However, under such circumstances the scope of the Government exclusion only covers the carrying on of debt counselling, debt adjusting and credit information services. An individual will not be acting in reasonable contemplation of an appointment as an insolvency practitioner whenever providing initial debt advice – only where there is a reasonable anticipation of such an appointment. It will therefore be incumbent upon an insolvency practitioner to use his or her professional judgement when considering the particular circumstances of each case to determine whether the exclusion will apply. An insolvency practitioner (or anyone else in a firm in which the insolvency practitioner operates) will not be able to rely on the Government exclusion if it is providing non-statutory debt solutions that do not constitute insolvency proceedings for the purposes of section 388 of the Insolvency Act 1986 - for example, debt management plans or debt arrangement schemes (for debtors habitually resident in Scotland). Insolvency practitioners providing such debt solutions are likely to require to be directly authorised by the FCA. Part 20 of the Financial Services and Markets Act 2000 (FSMA), deals with the provision of financial services by professional firms under the supervision of designated professional bodies (DPBs) of which they are members. A number of DPBs supervise the compliance of their members with rules approved by the FCA for the purpose of permitting some of their members/firms to carry on FCA regulated activities where they meet the relevant criteria for an exemption from FCA authorisation under Part 20 of FSMA. One of the key criteria for the exemption is that the regulated activity must be carried on by the firm ‘incidental’ to the provision of its professional services. i.e. the provision of the professional service cannot itself incorporate the carrying on of the regulated activity. So, for example, an accountancy practice may be able to give debt advice under a DPB exemption without the firm needing FCA authorisation, provided that the debt counselling is only incidental to the provision of accountancy services (and the other relevant criteria for an exemption under Part 20 of FSMA are met). To be eligible for an exemption under Part 20 FSMA, an insolvency practitioner must be a member of a designated professional body or controlled or managed by one or more such members[i]. However, because ‘professional services’ in Part 20 are services which do not constitute the carrying on of a regulated activity, the provision of debt counselling and/or debt adjusting services by an insolvency practitioner, that are outside the scope of the Government exclusion, would be carried on in the course of providing the IPs professional services (rather than incidental to them). Therefore those services are unlikely to meet the criteria to benefit from an exemption under Part 20 FSMA. Any enquiries regarding the above should be directed towards Joseph Sullivan, IP Regulation Section, telephone: 0207 637 6495 email: joseph.sullivan@insolvency.gov.uk [i] "members”, in relation to a profession, means persons who are entitled to practise the profession in question and, in practising it, are subject to the rules of the body designated in relation to that profession, whether or not they are members of that body. 72. The Insolvency Service Website As you may be aware, the Insolvency Service transitioned its website information to GOV.UK in July of this year. Now that the site content has had time to settle in, we are looking at content for our specialist users and we would be interested in your views on how we can support the work you do. If we, for example, were to create an area specifically for insolvency practitioners and their customers, what would you like it contain, or is there any insolvency related subject matter that you feel is not currently covered on GOV.UK that would assist you. Please send your thoughts to web.admin@insolvency.gov.uk Further to this, we have an email group specifically for insolvency professionals that is used to provide relevant alerts and updates including web content changes and would welcome you and your colleagues to subscribe. You can subscribe to the Insolvency Professionals group, and other email groups maintained by the Insolvency Service at: https://public.govdelivery.com/accounts/UKIS/subscriber/new. Any enquiries regarding the above should be directed towards email: web.admin@insolvency.gov.uk 73. New Official Statistics Publication on Enforcement Outcomes The Insolvency Service is developing a new quarterly Official Statistics release, Insolvency Service Enforcement Outcomes. Information on the number of director disqualifications, public interest winding up orders and bankruptcy and debt relief order restrictions will be reported. The first edition will be published 20 May 2015 and will include information up to January to March 2015. For more information, or if you would like to be notified when the new statistics are published, contact statistics@insolvency.gov.uk General enquiries regarding this article may be directed to email statistic@insolvency.gov.uk 74. Insolvency Guidance Paper – Retention of Title In November, the authorising bodies issued a new insolvency guidance paper (IGP) on retention of title. IGPs are developed and approved by the Joint Insolvency Committee (JIC), and adopted by each of the insolvency authorising bodies. In this instance, the IGP was developed with the assistance of the Association of British Insurers which is represented on the JIC as one of the committee’s lay members. Practitioners can view the new IGP here: IGPs are issued to insolvency practitioners to provide guidance on matters that may require consideration in the conduct of insolvency work or in an insolvency practitioner’s practice. Unlike SIPs, which set out required practice, IGPs are purely guidance and practitioners may develop different approaches to the areas covered by the IGPs. Any enquiries
regarding this article should be directed towards 75. Making the most of Intellectual Property This article has been provided by Rosa Wilkinson, Director of Innovation and Strategic Communications at the Intellectual Property Office. Few readers of Dear IP would, I am sure, disagree with the notion that intellectual property matters. That is undoubtedly the case when we’re talking about an Insolvency Practitioner. The best can make a huge difference to the end of life of a firm and the experience of creditors and those who had business relationships with it. In recent years developed economies have seen intellectual property move from the margins to the mainstream of business thinking. Even the likes of Dragons Den now pick up on the increased recognition that the potential for business success often depends on effective management of intellectual property assets - few bidders succeed in securing investment unless they can convince the Dragons that their good ideas, inventions and trade marks have been protected and won’t be challenged. And these intangible assets are where we’re spending our money: in 2011, UK businesses invested significantly more in ideas and knowledge than in tangible assets like bricks and machinery, £126 billion compared to £88 billion. The trends show that intangible investment continues to rise whilst tangible investment has, at best, flat lined. These levels of investment are not widely understood or appreciated. As insolvency practitioners will well know, too often businesses don’t keep a formal record of their intellectual property assets. Many businesses are not always aware of the value of their intellectual property, and the advice they receive tends to ignore it when assessing their balance sheet. In all too many cases, intellectual property assets are not fully exploited within a business whether to generate additional income or to secure finance for the next phase of growth. This latter point was something that the Intellectual Property Office (IPO) realised when that innovative companies, rich in intellectual property but poor in tangible assets, increasingly reported their difficulty accessing lending to help them grow. In response to this the IPO developed and recently launched a new intellectual property finance toolkit that helps businesses, their advisers and the lending community talk the same language. It will help businesses identify and value their intellectual property assets when applying for finance and develop more effective management and commercialisation strategies for their intellectual property. It will also help make companies more aware of the range of finance options open to them. This is good news for innovative firms, for business lending and for the economy more generally. How does this affect Insolvency Practitioners? The disciplines involved in identifying and exploiting intellectual property assets are similar to those that insolvency practitioners use to assess the value of failing firms. A deeper understanding of the value of intellectual property assets through the business growth cycle is a great opportunity to help firms that might be in trouble. It can help identify assets that may be ignored or undervalued that might potentially generate income when seeking debt finance. Similarly it can help realise the full value of a company when it goes into administration. The simple steps and practical tools the kit offers will help improve the understanding and management of intellectual property assets. And that is good for all concerned. 76. The Care Act 2014 - Local Authorities’ etc. ‘Provider Failure’ Duties This article which has been provided by the Department of Health, draws attention to duties on local authorities and on Health and Social Care trusts (“authorities”) under the Care Act 2014 in the event that a care provider’s business financially fails. In particular, it requests an insolvency practitioner to make local authorities aware of relevant insolvency events in relation to a financially failed provider in order to minimise the risk of disruption to services by enabling local authorities to be better prepared to step in if required. From April 2015, the Care Act will place temporary duties on local authorities in England and Wales and on Health and Social Care trusts in Northern Ireland (“authorities”) to meet the care and support needs, of adults receiving services in their area where their care provider (in relation to England this is a provider registered with the Care Quality Commission in respect of the carrying on of a regulated activity) can no longer carry on because of ‘business failure’. Regulations made under the Care Act, the Care and Support (Business Failure) Regulations 2015 (“the 2015 Regulations”), specify the meaning of business failure for these purposes. A business failure ‘event’ will typically involve the appointment of an insolvency practitioner to administer the affairs of a financially failed care business and if followed by the inability of the service provider to continue (i.e. both elements - failure and inability - are needed), the temporary duty on authorities to step in and meet care and support needs will be triggered in respect of each individual receiving services from the failed provider (in England this is regardless of whether a local authority was previously responsible for arranging their care or the care was arranged privately; in Wales, Scotland and Northern Ireland, the duty is limited to situations where the provider was meeting needs under arrangements made by or funded by an authority in another UK country). The temporary duty is not triggered if the service continues but the business is insolvent; we recognise that it is fairly common for an insolvency practitioner to continue to trade a failed business whilst looking to sell it as a ‘going concern’ or provide an opportunity for the existing management or another operator to deliver a turnaround plan. Unless the care provider becomes unable to carry on, it will remain the provider’s responsibility to provide services and authorities would not be required to intervene because the service will be continuing. The temporary duty is more likely to be triggered if an insolvency practitioner deems that the business is no longer financially viable and chooses to wind it down and close the service, leading to inability of the business to continue, with the result that care and support, or support, needs go unmet. A local authority may not be aware that a care provider in its area has failed financially as it may not have contracts with that provider in place. To enable local authorities to discharge their temporary duties under the Care Act, insolvency practitioners appointed in relation to a registered care provider’s business are requested to notify the Director of Adult Social Services (or their equivalents in Wales and Scotland) of the local authority in whose area the service is located of their appointment and/or business failure event and advise on their intention as regards whether to continue to trade or wind down the business as soon as possible following their appointment. For reference, under the 2015 Regulations, available online at http://www.legislation.gov.uk/uksi/2015/301/pdfs/uksi_20150301_en.pdf the following events constitute ‘business failure’ (in relation to providers who are not individuals):
Any enquiries regarding this article should be directed towards Stephen Airey, Department of Health, Area 313b, Richmond House, 79 Whitehall, SW1A 2NS telephone: 0207 210 5710, email: Stephen.airey@dh.gsi.gov.uk 77. Insolvency Service guidance to Official Receivers and DRO intermediaries on undrawn pension entitlements In the light of the decision in Horton v Henry [2014] EWHC 4209 (Ch), guidance has been issued to Official Receivers and Debt Relief Order (DRO) intermediaries on how to deal with undrawn pension entitlements in bankruptcies and when considering DRO applications. The guidance has been issued pending further consideration of the decision by the Court of Appeal. In broad terms, Official Receivers are being advised that they should follow the later decision in Henry v Horton which provides greater protection for pensions not in payment. The full terms of the guidance can be found at: Any enquiries regarding the above should be directed towards Simon Whiting, External Affairs (Policy), 4 Abbey Orchard Street, London SW1P 2HT; telephone: 0207 637 6246; email: simon.whiting@insolvency.gov.uk 78. Deregulation Bill and Small Business, Enterprise and Employment Bill get Royal Assent On 26 March 2015 the Deregulation Bill and the Small Business, Enterprise and Employment Bill both received Royal Assent and are thereby now Acts of Parliament. Measures in the two Acts do not come into force immediately but will be commenced in a phased way over the course of the next year or more. The first measures will come into force in May 2015. These will include:
The next changes will not come into force before October 2015. These are likely to include:
The following measures will not be commenced before April 2016:
We also take this opportunity to thank those who have helped shape the policy in relation to these measures through consultation processes and passage of the two Bills through Parliament. Further implementation updates will be provided as the timetable is confirmed over the coming months. The new legislation is accessible via the following links: Deregulation Act 2015 http://www.legislation.gov.uk/ukpga/2015/20/contents/enacted Small Business, Enterprise and Employment Act 2015 http://www.legislation.gov.uk/ukpga/2015/26/contents/enacted Any enquiries regarding this article should be directed towards Tom Phillips at The Insolvency Service, 4 Abbey Orchard Street, London SW1P 2HT telephone: 020 7637 6421 email: tom.phillips@insolvency.gov.uk
[1] This power (which
lapses five years after commencement) would only be used if
the voluntary measures arising from the Graham Review into
pre-pack administration proved unsuccessfu
79.
Small Business, Enterprise and Employment Act 2015 and
Deregulation Act 2015 - New insolvency measures coming into
force in May 2015
The following measures contained in the
Small Business, Enterprise and Employment Act (SBEEA) 2015
and the Deregulation Act (DA) 2015 will come into effect on
26 May 2015. With the exception of changes to Fast Track
Voluntary Arrangements, there are no transitional measures
associated with these changes, which will therefor apply to
existing and new cases.
Removal of requirement for liquidators
and trustees to seek sanction
Liquidators and trustees will be able to
exercise any of the powers contained in section 314(2),
Schedule 4 and Schedule 5 of the Insolvency Act 1986 without
the need to obtain sanction (s. 120 and s. 121 SBEEA 2015).
Administrations
An administrator’s term in office can now
be extended with the consent of creditors for a specified
period, up to one year (s. 127 SBEEA 2015)
Clarification that the court’s permission
is not required where the only payment to be made to
unsecured creditors by the administrator is the prescribed
part (s. 128 SBEEA 2015).
A new statutory trigger has been created
to allow Scottish floating charges to crystallise in
administration where funds are available to allow a
distribution to be made to unsecured creditors (s. 130 SBEEA
2015).
Clarification that a winding up petition
presented during an interim moratorium preceding an
administration does not prevent the appointment of the
proposed administrator (Schedule 6, para 5 DA 2015).
Small Debts
There are now powers to make rules to
allow an office-holder to pay a dividend without the need
for a creditor to submit a claim where the debt falls below
a certain amount. The current intention is that these powers
will not be exercised until the new Insolvency Rules come
into force as part of the Rules modernisation project (s.
131 and s. 132 SBEEA 2015).
Voluntary Arrangements
The time limit for interested parties,
such as creditors, to challenge the outcome of the
creditors’ decision as to whether to accept an IVA proposal
where there has been no interim order made, is set as 28
days from the date on which the report of the decision is
filed with the court (s. 134 SBEEA 2015).
Fast-track voluntary arrangements (FTVAs)
will be abolished while the small number of existing FTVAs
will continue (s.135 SBEEA 2015).
Voluntary Liquidation
In a voluntary liquidation, a progress
report must be issued if the liquidator changes within the
first year of the liquidation (s. 136 SBEEA 2015).
We will continue to provide further
updates on the other measures in the Small Business,
Enterprise and Employment Act 2015 and the Deregulation Act
2015 once commencement dates are finalised.
In the meantime, if you would like
further detail about the above measures or any of the other
measures in the two Acts, you can visit the following pages:
Deregulation Act 2015
http://www.legislation.gov.uk/ukpga/2015/20/contents/enacted
Small Business, Enterprise and
Employment Act 2015
http://www.legislation.gov.uk/ukpga/2015/26/contents/enacted
Any enquiries regarding this article
should be directed towards the policy unit on telephone: 020
7291 6740 or email: policy.unit@insolvency.gov.uk
80. Consumer prepayments on retailer insolvency: a
consultation In a consultation
paper published this month, the Law Commission asks whether
prepaying consumers should be better protected in the event
of company insolvency. A study by Consumer
Focus in 2009 found that approximately 24.5 million
prepayment transactions are made each year in the UK by
around 20 million consumers. These range from the purchase
of low value gift vouchers to the making of significant
deposits for items like bathroom and kitchen suites. In
addition, with the prevalence of internet sales, prepayments
are on the rise in the UK. However, recent
high-profile retailer insolvencies have highlighted the
position of consumers making these kinds of payments. The
collapse of the Farepak Christmas savings club in 2006 left
many consumers out of pocket. More recently, unused gift
vouchers worth £4.7 million remained in circulation when
Comet collapsed and furniture retailer MFI held over £25
million in customer deposits when it went into
administration. In 1982, the Cork
Report on insolvency law rejected greater protection for
consumers, noting that consumers often lose small and
affordable amounts whereas the effect on suppliers can be
catastrophic. But following the Farepak collapse, the
Treasury Select Committee described the existing safety net
as “inadequate and incomplete”. The OFT carried out a
review, and ministers asked the Department for Business,
Innovation and Skills to consider providing more protection
for consumers. BIS commissioned the Law Commission to
examine the existing protections given to prepayments and
consider whether such protections should be strengthened.
The issues are
complex and go to the heart of the insolvency regime.
Assessing the
scale of the problem An analysis of
twenty major high-street retailer insolvencies undertaken by
the Commission shows that the losses to customers are often
low. Gift vouchers tend to be issued in relatively small
amounts and, in many of the cases reviewed by the Law
Commission, administrators honoured vouchers during a period
of trading in administration. The analysis suggests that the
consumers who stand to lose most are those who have paid
significant deposits for large items such as furniture or
kitchens, particularly if they have paid by cash or cheque. Possible means of
protection The Law Commission’s
consultation paper looks at a variety of possible options
for protection, including:
Limited changes to insolvency law,
in the form of a limited preference for consumers making
relatively large prepayments by cash or cheque in the run up
to the insolvency
Increased use of trust accounts
Insurance/bonding products
Increased transparency around
chargeback for those who pay by credit or debit card
A new form of security to be
registered at Companies House
New rules relating to the transfer
of ownership in goods The consultation
asks whether sufficient protections could be achieved
through improved voluntary mechanisms or whether regulation
would be required. The Law Commission
is keen to hear as many views as possible, and responses are
invited by 17 September 2015. A copy of the
consultation paper is available on the Law Commission’s
website at:
http://lawcommission.justice.gov.uk/consultations/consumer_prepayments.htm.
Any enquiries regarding this article should be directed
towards the policy unit on telephone: 020 7291 6740 or
email:
policy.unit@insolvency.gov.uk
81. New Insolvency Measures – October
2015
PRIMARY LEGISLATION
Deregulation Act 2015
The following measures contained in the
Deregulation Act 2015 will come into effect on 01 October
2015.
Authorisation of Insolvency
Practitioners
A new regime will allow for the partial
authorisation of insolvency practitioners. In future,
insolvency practitioners will be able to be authorised in
relation solely to companies, solely to individuals or to
both (fully authorised - as is currently the case).
The Secretary of State will no longer
directly authorise insolvency practitioners, and so in
future, all insolvency practitioners will be authorised by
Recognised Professional Bodies. A transitional period of
one year will allow insolvency practitioners currently
authorised by the Secretary of State time to seek
authorisation from one of those bodies.
Provisions introduced by the Insolvency
Act 2000 intended to allow non-insolvency practitioners to
act in relation to voluntary arrangements only, which were
never used and are no longer considered necessary, will be
removed.
Appointment and release of
administrators
An amendment to Schedule B1 of the
Insolvency Act 1986 amends the current requirement for a
company or its directors intending to appoint an
administrator to give notice of the intention to appoint
to anyone entitled to appoint an administrative receiver
of the company, to any holder of a qualifying floating
charge entitled to appoint an administrator, and to other
prescribed persons.
Once commenced, no notice will be
required in respect of the prescribed persons where there
is no one entitled to appoint an administrative receiver
or to any holder of a qualifying floating charge. This
will prevent unnecessary delays in the appointment
process.
A further amendment to Schedule B1
clarifies that the approval of unsecured creditors is not
required before an administrator can obtain his or her
release in cases where a paragraph 52(1)(b) statement has
been made.
Bank accounts for bankrupts
Changes to the law governing
‘after-acquired property’ in bankruptcy will mean that
bankrupt people will have improved access to basic bank
accounts. If account holders withdraw funds, banks will be
protected from recovery action by trustees in bankruptcy
if they had not received specific notice that the funds
had been claimed as part of the bankruptcy estate. The
banks have confirmed that they will provide basic banking
facilities to bankrupt people following this change.
Other changes
A number of other minor changes will be
commenced in October, including: the repeal of the Deeds
of Arrangement Act 1914; the repeal of section 151 of the
Insolvency Act 1986 (payment into bank of money due to a
company); a change to section 7(4) of the Company
Directors Disqualification Act 1986 which will allow the
Secretary of State (or Official Receiver) to require
information from third parties for the purpose of
investigation in non compulsory insolvency cases (see
section on Disqualification below); and the insertion of a
new subsection into section 174 of the Insolvency Act 1986
which provides that the liquidator, when a winding-up
order is rescinded, has his or her release with effect
from the time the court may determine.
Small Business, Enterprise and
Employment Act 2015
The following measures contained in the
Small Business, Enterprise and Employment Act (SBEEA) 2015
will come into effect on 01 October 2015.
Strengthened regulatory regime
Following two independent reviews and
consultations, measures were brought forward in The Small
Business, Enterprise and Employment Act 2015 to reform the
regulatory regime for Insolvency Practitioners (IPs). The
aim of the measures is to strengthen the regulatory
framework for IPs, thus providing greater confidence in
the insolvency profession. Sections 137-142 of The Small
Business, Enterprise and Employment Act 2015 achieves this
by amending Part 13 of the Insolvency Act 1986 to:
Section 143 enables the Secretary of
State to apply to court to secure compliance with a
requirement that the Secretary of State has placed on an
RPB.
Sections 144-146 give the Secretary of
State a power to establish a single regulator of IPs
should the changes to the regime not have the desired
effect of increasing confidence. This is a reserve power
which will lapse after 7 years if not used.
The regulatory objectives and sanctions
apply for acts or omissions by RPBs in discharging their
regulatory functions, or failure to comply with a new
requirement, from 1st October 2015.
The power to apply to court to directly
sanction an IP in the public interest applies to conduct
on or after 1st October 2015, notwithstanding the date of
appointment as office holder.
Disqualification
The measures
Sections 104-116 provide for a package
of measures to further strengthen the director
disqualification regime. Taking forwards proposals
outlined in the ‘Transparency and Trust’ consultation that
took place in 2013/14, they place a strong emphasis on
accountability with provisions that: give
the Secretary of State and the courts the power to
disqualify a person convicted of a company related
offence abroad; allow
for the disqualification of a person who influences or
instructs unfit directors;
clearly set out the matters that the Secretary of State
or the court must take into account when considering
whether a person should be disqualified. The matters
will include breaches of laws or regulations, the loss
or harm their conduct has caused and its frequency; extend
from 2 years to 3 years the period in which the
Secretary of State can apply to court for a
disqualification order against the director of an
insolvent company; remove
the restrictions on what material he can rely on when
seeking a disqualification in other cases. This will
allow the Secretary of State to use information from
other regulators in his proceedings; create
compensation orders and undertakings meaning that a
disqualified director can be required to pay the amount
of money creditors lost through his misconduct.
Compensation can be sought for conduct that occurs on or
after 1 October 2015.
One final disqualification measure
under the SBEEA 15 which will not be coming into force on
October 2015 is the streamlined reporting of director
misconduct in insolvent companies. This measure will be
implemented from April 2016 with the first of the new
online conduct reports expected to be submitted in June
2016.
Implementation Although all of
the above disqualification measures will come into force
on 1 October, not all of them will have immediate effect,
with some biting upon new insolvencies after that date and
other upon conduct.
Measure - SBEEA 15
Will Affect
Notes
S104 - Disqualification following overseas
convictions
Convictions after commencement – regardless of when
the offence took place
S105 - Persons instructing a disqualified director
Instructions that give rise to conduct after
commencement that results in DQ
Although this provision extends to disqualification
other than under s6 CDDA, this means that we can
anticipate some delay before the first of such cases
reach the application stage.
S106 - Broadening Schedule 1 CDDA
Conduct after commencement
The
new schedule has wider application and will apply to
determinations by the courts under sections 2 to 4, 5A
8 or 10 of the CDDA and to the SoS in exercising
discretion to accept an undertaking under sections 5A,
7 or 8
S107 - Streamlined reporting of director misconduct in
insolvent companies
Insolvencies after commencement
NB
– Commencement from April 2016
There will be transitional arrangements in place until
September 2016 to allow for the final D1s and D2s.
Engagement with IPs already under way.
S108 - Time Limits for instituting proceedings
increased to 3 years
Insolvencies after commencement
S109 - removing reference to “investigative material”
in S8 CDDA
Conduct after commencement
S110 - Compensation Regime
Conduct after commencement
As
the compensation regime will apply to insolvent cases
only, we anticipate a significant delay before the
first applications are made and it is unlikely that
this will be before October 2016 at the earliest.
We
will be engaging with IPs as we develop the detail of
how the regime will operate.
De-Regulation Act 2015
Compulsory powers in non compulsory DQ investigations
Insolvencies after commencement
We
will be engaging further with IPs with respect to this
measure
Assignment of Actions
As well as the introduction of
compensation orders, there are further measures aimed at
promoting accountability and improving returns to
creditors in corporate insolvencies. Sections 117-119
extend to insolvent administrations the power for an
office-holder to bring fraudulent or wrongful trading
actions; previously such powers were available only in
insolvent liquidations. Office-holders will also be able
to assign such actions, as well as rights of action for
transactions at an undervalue/gratuitous alienations,
preferences/unfair preferences and extortionate credit
transactions.
If you would like further detail about
the above measures or any of the other measures in the two
Acts, you can visit the following pages:
Deregulation Act 2015
http://www.legislation.gov.uk/ukpga/2015/20/contents/enacted
Small Business, Enterprise and
Employment Act 2015
http://www.legislation.gov.uk/ukpga/2015/26/contents/enacted
SECONDARY LEGISLATION
Insolvency (Amendment) Rules 2015
These Rules require IPs to provide
creditors with an upfront estimate of their fees and
expenses when charging on a time and rate basis. They aim
to increase transparency for creditors and give them an
early indication of the costs of an insolvency case.
The new Rules apply to administrations,
creditor’s voluntary liquidations (CVL), compulsory
liquidations and bankruptcy.
Key features:
The new Rules can be found at
http://www.legislation.gov.uk/uksi/2015/443/made
Debt relief limits (DROs) and
creditor petition level increases
Two maximum limits, in place to
restrict access to DRO, are increasing to make them
accessible to more financially vulnerable people:-
This increase to the maximum asset
level does not affect the separate limit for a vehicle
which remains fixed at £1,000.
The change to debt relief orders can be
viewed at:
http://www.legislation.gov.uk/uksi/2015/26/contents/made
The bankruptcy creditor petition level
is increased to £5,000 from £750. This is to remove the
risk of bankruptcy and its costs from those individuals
with small debts.
The creditor petition order can be
viewed at:
http://www.legislation.gov.uk/uksi/2015/922/contents/made
Essential Supplies
The Insolvency (Protection of Essential
Supplies) Order 2015, made in March 2015, will come into
effect on 1 October. The Order will ensure that
insolvency practitioners are better able to secure the
continuation of supplies that are essential to the
continuation of a business.
The Order allows the Secretary of State
to amend sections 233 and 372 of the Insolvency Act 1986
to:
1.
Extend the list of suppliers
prevented from asking for more money as a condition of
continuing supply to IT suppliers;
2.
Extend the list of suppliers
prevented from asking for more money as a condition of
continuing supply to include ‘on sellers’ and intermediary
providers;
3.
Insert new provisions preventing
suppliers from relying on their insolvency-related
contractual terms to charge higher prices or terminate
the contract just because a business enters into
Administration or a voluntary arrangement
As the Order overrides contractual
rights, a number of safeguards will also come into effect
to allow suppliers to:
1.
Request a personal guarantee
from the insolvency office-holder as a condition of
continuing supply;
2.
Terminate supply where payment
for post-insolvency supply remains outstanding 28 days
after payment is due;
3.
Terminate supply with the
permission of the court.
The Order can be viewed at:
http://www.legislation.gov.uk/ukdsi/2015/9780111128992
General queries regarding the above
can be directed to
Policy.Unit@insolvency.gov.uk
82.
The introduction of gig – 1 October 2015
On 1 October 2015 The Insolvency
(Amendment) Rules 2015 (“the Amendment Rules”) will come
into force. The Amendment Rules will require office-holders
to provide all creditors with an estimate of their fees
where they are seeking remuneration on a time and rate basis
(“fees estimate”). The estimate will require creditor
approval both for the amount and the basis to which
remuneration is sought. In addition, in all cases, the
office-holder will need to provide an indication of the
likely work that will be needed in a case and the
anticipated expenses. An estimation of the likely expenses
will be for information only and will not require creditor
approval.
An article on the Amendment Rules was
included in the March 2015 (issue 65) edition of Dear IP.
The purpose of this article is to address some of the
queries that have been raised since the Amendment Rules were
published.
Providing a fee estimate in a
Creditors Voluntary Liquidation (CVL)
The legislation states at r4.127(2A) that
where the ‘liquidator’ proposes to take all or part of their
remuneration on the basis of time and rate, the ‘liquidator’
must prior to the basis being fixed, give to all creditors
of the company the fee estimate and details of the expenses.
The use of the word ‘liquidator’ is not intended to preclude
an insolvency practitioner from providing this information
ahead of a s98 meeting at which s/he is subsequently
appointed. What is important is that creditors are given
sufficient time to make an informed decision about the
reasonableness of the information provided. It would not be
appropriate for the estimate to be provided for the first
time at the meeting, and creditors expected to vote on it at
the same time. If it is not possible to provide the
information ahead of a meeting then a resolution should be
subsequently sought by correspondence.
Fee estimate where liquidation follows
an administration
In
administration, where it is anticipated at the outset that
the case will move into a CVL, the estimate may cover the
work of the subsequent CVL, or if this is not practical,
just the fees and expenses of the administration. This will
be a choice for the administrator at the time of providing
the fees estimate and will need to be made clear to
creditors what work is covered. If the estimate is for the
administration only but the company converts to a CVL
earlier than expected, and before the level of the fee
estimate is reached, the fee estimate may be carried forward
to the subsequent CVL if the details of the work to be done
for the fees estimated are the same i.e. the work will now
be done in the CVL rather in the administration. For
example if an administrator had proposed to seek the court's
approval to pay a (non-prescribed part) distribution to
unsecured creditors in an administration and had estimated
fees totalling £40,000 to conclude the administration
(including the distribution and exit by way of a
dissolution), but in fact the creditors modified the
proposals so that the administration must move to CVL (and
they approved the administrator's fees on a time cost
basis). If the administrator's time costs totalled £30,000
by the time he was appointed Liquidator, he would be able to
incur and draw fees of £10,000 before he reverted to
creditors as long as the work he was doing in the
liquidation was the same that he anticipated to be done in
the administration.
Exceeding the fees estimate
The office-holder must not exceed the
total amount set out in the fees estimate without approval
(r2.109AB, R4.131AB and 6.142AB). However as work cannot
stop on a case, there may be instances where an
office-holder exceeds the fees estimate before approval is
sought/obtained. The Amendment Rules do not preclude fees
being incurred during this period but do prevent them from
being drawn down/taken unless or until approved.
Milestone estimates
It will not always be possible to
accurately estimate the work that will need to be done at
the beginning of a case. If this is the case it may be
better to provide an estimate up to a particular milestone
or for a designated period and seek further approval at a
later point. It is important that in doing so creditors are
clear about what they are agreeing to and that the
insolvency practitioner will need to revert to them for
further approval at that milestone or later point. This is
provided for in the legislation in r13.13(18A)(d) and (e)
and in rules 2.109AB, 4.131AB and 6.142AB (e ) and (f).
Transitional provisions – s137
appointments
There are no transitional provisions that
apply where a liquidator is appointed in a compulsory
liquidation by the Secretary of State under s137. The effect
of this is that the new provisions will apply to existing,
pre-October appointments, where the basis of remuneration is
fixed or changed after 1 October 2015; as well as to new
appointments post 1October 2015. For cases where the basis
is set before 1October 2015 the new rules will not apply and
there will be no requirement to provide creditors with an
estimate.
Use of ranges or alternatives
While acknowledging that it may be
difficult to estimate fees or the work required for some
scenarios, the estimate must be clear and absolute – it is
not permissible for an estimate to be a range of fees, nor
for alternative estimates to be given at one time. Any
estimate must be fixed until and unless creditors are asked
to approve any revised fees estimate. If an estimate is
necessarily uncertain then creditors should be informed, and
therefore have some expectation of a revised estimate. .
The only occasion where a range would be
permissible would be when estimating expenses and repeating
a range quoted by a third party, for instance for legal
costs in litigation.
Any enquiries regarding the above
should be directed towards
Alison Ireland, Insolvency Service Policy Directorate,
telephone: 0207 637 6365
email:
Alison.Ireland@insolvency.gov.uk
The Law
Commission has published a consultation paper that looks at
how to reform the law of bills of sale. Some of its
proposals may have an impact on how insolvency practitioners
seek to discover the goods that are available for
distribution in the event of bankruptcy. A bill
of sale is a document by which a person transfers ownership
of goods to another. This can cover a wide variety of
transactions: people can sell their goods, exchange them,
give them as gifts, or mortgage them to get a loan. If the
former owner delivers the goods to the new owner, a bill of
sale is not necessary. The new owner obtains ownership by
virtue of possession. A bill of sale is used in situations
where the former owner nevertheless keeps possession of the
goods. Bills of sale can only be granted by individuals and
unincorporated businesses. They must be granted over
specific goods already owned by the former owner. A
former owner who remains in possession of goods subject to a
bill of sale may give the impression of “false wealth”. If
the former owner becomes bankrupt, it is essential that
insolvency practitioners have a means of discovering the
goods which are available for distribution.
Unfortunately, the current law regulating bills of sale does
not provide a user-friendly means of discovering the
existence of bills of sale. In some cases, continued
regulation of bills of sale may be unnecessary. The
current law Bills
of sale are regulated by two Victorian pieces of
legislation: the Bills of Sale Act 1878 and the Bills of
Sale Act (1878) Amendment Act 1882. The legislation
distinguishes between “security bills” and “absolute bills”.
“Security bills” are bills of sale that are used to borrow
money: the borrower transfers ownership of their goods to
the lender as security for a loan. “Absolute bills” are
bills of sale that are used for purposes other than to
borrow money. Both
security bills and absolute bills must be registered at the
High Court in order to be valid against a trustee in
bankruptcy. The High Court register is paper-based and
cannot be searched online. Instead, interested third parties
must ask High Court staff to search against the former
owner’s name and postcode in person or by post at a fee of
£45. Uses
of bills of sale The Law
Commission conducted two surveys of the High Court registry
of bills of sale. It estimates that 90% of the bills of sale
registered in 2014 were security bills over vehicles
(so-called “logbook loans”). It further estimates that
around 0.5% of the bills of sale registered in 2014 were
security bills granted over goods other than vehicles. There
was no evidence that any absolute bills were registered in
2014.
Proposals for reform In its
consultation paper, the Law Commission makes proposals to
reform the registration of bills of sale that could affect
how insolvency practitioners search for them in three ways:
Responding to the consultation The Law
Commission welcomes responses from insolvency practitioners
on how its proposals may affect them. In particular, it
seeks information on the impact of the proposal to abolish
registration of absolute bills. Further
information, including the full consultation paper, is
available at
http://www.lawcom.gov.uk/projects/bills-of-sale/. The
Law Commission seeks responses by 9 December 2015. Fan
Yang, lawyer, and Robert Ward, research assistant, Law
Commission
84.
Insolvency Service and Financial Conduct Authority On 7
December, representatives of the FCA and the Insolvency
Service met to discuss matters of mutual interest – in
particular ways in which to ensure that the FCA regulatory
regime for debt management and the regulatory regime for
insolvency remain joined up. There was particular focus on
better information sharing between regulatory bodies in both
regimes with a view to ensuring that adverse information in
relation to IPs (and those that employ them where relevant)
in one regulatory regime can be shared with- and acted upon-
by the regulator(s) in the other regime if/where relevant.
The RPBs are also engaged on these matters. Further
discussions will be taking place in the New Year.
General enquiries may be directed to email
IPRegulation.Section@insolvency.gov.uk Telephone:
020 7291 6771
85.
‘Flag it Up’ Campaign launch On 30
November Government, together with the legal and accountancy
industries, launched a joint campaign to raise awareness of
the warning signs of money laundering. The
campaign, ‘Flag it Up’, has been developed with the
Accountancy Affinity Group (AAG), Law Society and Solicitors
Regulation Authority (SRA) to help accountants and
solicitors spot the red flags which could indicate criminal
activity. Flag
it Up will run through to March 2016, providing best
practice guidance on how to protect business’s reputation
and ensure they are not caught up in criminality. The
size and complexity of the UK financial and professional
services sectors mean they are more exposed to criminality
than those in many other countries, and it is essential that
Government and industry work together to tackle this threat.
Through recent amendments to strengthen the Proceeds of
Crime Act, Government is making it harder than ever for
people to move, hide and use the proceeds of crime. The Act
gives law enforcement agencies the powers to recover
criminal assets and freeze suspicious funds. The Serious
Crime Act 2015 made it a criminal offence to participate in
the activities of an organised crime group. The
campaign website and the relevant links to money laundering
guidance issued by the RPBs can be found at
http://accountancysupervisors.co/flagitup/.
General enquiries regarding this article may be directed to
Flagitup@consolidatedpr.com
86. Changes to the
CFA and ATE recoverability
From 6 April the no win no fee reforms
introduced by the Legal Aid, Sentencing and Punishment of
Offenders Act 2012 will apply to insolvency proceedings.
These reforms came into effect in April 2013 but were
delayed in respect of insolvency proceedings to give
insolvency practitioners and other interested parties time
to prepare for, and adapt to, the changes.
The Order, made on 10 March, means that
from 6 April successful litigants in insolvency cases will
no longer be able to recover After The Event insurance
premiums and the uplift applied to Conditional Fee
Arrangements from the losing side.
The Order can be viewed at: http://www.legislation.gov.uk/uksi/2016/345/article/2/made
Any enquiries regarding this article
should be directed towards email:
policy.unit@insolvency.gov.uk
87.
Working with the National Employment Savings Trust (NEST)
Over
the next few years The Pensions Regulator expects 1.8
million small employers will be impacted by auto enrolment,
the government’s workplace pension initiative. Given many
businesses don’t survive beyond five years of trading,
pension providers and insolvency practitioners might be
working together more often in the coming years. As one the
largest pension providers in the UK, you are likely to come
across NEST more regularly in the future. The law
on workplace pension provision changed in 2012. Government
introduced reforms which mean that employers have to enrol
eligible workers into a qualifying workplace pension scheme.
NEST
was set up as part of the auto enrolment reforms. NEST was
designed to be an online scheme to ensure we can deliver at
scale, keep our costs low and make scheme administration as
straightforward as possible for members and employers. “Our
public service obligation means we’re open to any employer
who wants to use us for auto enrolment and we’re also open
to any self-employed person who wishes to set up a pension.
As well as always being open to employers, we are also free
for them to use”. NEST
have provided the following top tips to insolvency
practitioners:
1.
Activating your delegate account within 28 days Once an
insolvency practitioner has provided all of the information
we need to verify you’re working on behalf of an employer,
we email you a link to activate your online delegate
account. This link expires after 28 days. Currently, some of
the links aren’t being activated in this time frame, meaning
that access to an employers’ account isn’t possible. Keep a
close eye out for the email we send and make sure you
activate your link in time.
2.
Informing us of insolvency Often
the very first time we hear that an employer has become
insolvent is when an insolvency practitioner tells us. It’s
important to tell us the right information. As an online
scheme the information we hold about an employer, including
their name, is entered by them directly onto our system. We
only have the information that they give us. If the business
has complex organisational structures, for example including
umbrella companies, it’s useful to know this when you speak
to us. It may be that we need you to make some adjustments
to the system before we can mark an employer insolvent.
These changes will depend on the specifics of the case, so
the more information you have about the structure, the
better.
3.
The use of contribution corrections versus the use of direct debit
indemnity claims If you
find that an employer made a contribution in error and they
paid by direct debit, please don’t use the option of a
direct debit indemnity claim under the direct debit
guarantee. Pulling
money from the scheme via the use of the direct debit
guarantee takes money from NEST but does not reverse the
contributions that have been made to a member’s pot. This
might then result in a tax charge from HMRC being levied.
Instead, to avoid this, you have two options depending on
the situation:
a.
If the date
of insolvency was prior to the period the contribution was
made, you’ll need to log onto your NEST account to do a
‘contribution correction’. This involves reversing the
expectations for each member and will automatically trigger
a refund to the bank account
b.
If the date
of insolvency was during/after the period the contribution
was made and contributions to members were due but void
because of insolvency, you’ll need to inform us. We’ll need
evidence to show that this is what’s happened and we’ll do
an adjustment on the account that will refund the money.
4.
Cheques without a schedule
Whenever you are sending money to us via cheque, please make
sure that you also complete the contribution schedule online
too. As an online scheme, without the contribution schedule
we’ll not know how to allocate the money and so we’ll return
it to you. This means that the contributions go unpaid and
the employer has not met their legal duties. What
can you do if you have any issues? If you
experience any issues with a case you’re dealing with there
are several channels to help. Your first port of call should
be the ‘How To’ guides on the
website. These helpful
guides contain a lot of the information you’ll need to know.
If you want to talk to someone, there is a
web chat option where an agent can guide you through any
issues. If you still need help, there is also a contact
centre. With
the number of small employers due to stage over the next few
years, NEST are always looking for ways to become more
efficient and work more effectively with insolvency
practitioners. If practitioners would like to provide any
feedback, please contact Georgina Maskell (georgina.maskell@insolvency.gov.uk).
General enquiries may be directed to email
IPRegulation.section@insolvency.gov.uk
88. Insolvency Service Consultation: A
Review of the Corporate Insolvency Framework As
practitioners may be aware, the Government is currently
consulting on proposals to improve the corporate insolvency
framework. The UK’s corporate insolvency regime is highly
regarded internationally (ranked as one of the top 15 in the
world by the World Bank), but we want to ensure that it
continues to deliver the best possible outcomes for
business. The
consultation therefore seeks views on whether the insolvency
regime needs updating in light of international principles
developed by the World Bank and the United Nations
Commission on International Trade Law (UNCITRAL), as well as
in the wake of recent large corporate failures. We are
inviting comments on four broad areas for reform, including:
introducing a moratorium for distressed
businesses to benefit from protection against legal action
while considering their options for rescue;
widening the definition of essential
supplies, with appropriate safeguards for suppliers, to
assist distressed businesses;
developing a new restructuring plan to
increase the options available to rescue businesses; and
increasing the availability of rescue
finance. | |||||||||||||||||||||||||||||||||||||||||||||||||||