1.    The Judgements Act 1838

Under sections 189 and 328 of the Insolvency Act 1986 a surplus remaining after debts have been paid in full, is to be used in paying interest on those debts, either at the rate specified in section 17 of the Judgements Act 1838 or at the contractual rate, whichever is greater. As from 1 April 1993 the rate specified in Section 17 was reduced from 15% to 8%, and only applied to liquidations or bankruptcies commencing after that date.

The Service’s view is that paragraph 1 of schedule 4 to the Act does not apply so as to require a liquidator to obtain sanction under section 165 or 167 before paying the preferential creditors in full.

Paragraph 1 of schedule 4 is concerned with the powers of a liquidator to pay any class of creditors in full. The liquidator has a duty (imposed by section 175 of the Act) to pay the preferential creditors in full, after paying the expenses of a winding up, provided there are sufficient assets to meet those debts.

A number of the substantive provisions of the Environment Act 1995, which received Royal Assent on 19 July 1995, are to be brought into force with effect from 1 April 1996, others will be brought into force by subsequent commencement orders. The Act contains a fairly diverse package of environmental measures, some of which are new whilst others amend existing provisions elsewhere in environmental legislation. Important changes are also made with regard to the authorities responsible for overseeing environmental legislation, with two new bodies, the Environment Agency and the Scottish Environment Protection Agency, being created. It is not possible to review in detail all the provisions of the Act which may have an impact on insolvency practitioners. However, particular attention is drawn to the following.

Contaminated Land - Powers are granted to local authorities and the Environment Agency to require owners and occupiers of contaminated land to take remedial action by service of a "remediation notice" setting out what must be done, and by when, to clean up the damage. Default in complying with a remediation notice may lead to the local authority or Agency carrying out the work. Failure to deal with such a notice is an offence and may lead to liability for the authority's or Agency's remediation costs. However, insolvency office-holders will not be guilty of such an offence, nor personally liable for the costs of clearing up, provided the damage requiring remediation is not attributable to any unreasonable act or omission on their part. The full provisions are set out at section 57 of the Act which inserts new sections 78A-78YC into the Environmental Protection Act 1990.

Abandoned Mines - Any person operating a mine is required to give six months notice to the Environment Agency or the Scottish Environment Protection Agency, as appropriate, of any proposed abandonment of the mine. The definition of abandonment is very wide and may, for example, include discontinuance of mining activities, cessation of the working of any seam or vein, or the discontinuance of water removal operations. It is a criminal offence to fail to comply with this requirement. Insolvency practitioners appointed, or contemplating appointment, in respect of any insolvent estate which has an interest in a mine will need to be aware of this requirement. An insolvency practitioner's duty to comply with this provision is not removed by a disclaimer made in respect of a mine under insolvency legislation. The full statutory provisions are set out at section 58 and 59 of the Act which insert new sections 91A and B into the Water Resources Act 1991 (England and Wales) and section 30Y and Z into the Control of Pollution Act 1974 (Scotland).

Powers of Entry and to Require Information - Powers are given to enforcing authorities (which include the Environment Agency and local authorities), or a person authorised by those authorities, to enter premises for various purposes in connection with pollution control. Information and documents, including extracts from any computerised records, may also be required from any person thought to be capable of supplying that information or those documents. It is an offence to obstruct an enforcing authority, or any duly authorised person, or, without reasonable excuse, to fail to supply information or documents requested. Any insolvency practitioner acting in relation to an estate in respect of which any of these powers is exercised would be obliged to comply with the provisions. The provisions are set out at section 108-110 of the Act.

Contact: Mike Edbury, Insolvency Practitioner Section, the Insolvency Service, PO Box 203, 21 Bloomsbury Street, London WC1B 3QW (telephone 020 7291 6771/2)

4.    Criminal Procedure and Investigation Act 1996 (The Act)

1. The disclosure provisions of the Act came into operation on 1 April 1997, and together with the associated Code of Practice comprise a new regime for cases where a criminal investigation commenced on or after that date.

The Act introduced a three-tier system of disclosure namely: -

1. Primary disclosure - the duty of the prosecutor to disclose prosecution material to the defence which, in the opinion of the prosecution, undermines the case for the prosecution against the accused. Primary disclosure is triggered where the accused faces summary trial (i.e. in a Magistrates Court) and pleads not guilty, or the accused is committed, or the case is transferred, for trial by jury.
2. Defence statement – is a statement setting out in general terms the nature of the defence, indicating the matters on which the accused takes issues with the prosecution, and in the case of each matter, the reasons why. A defence statement is compulsory for an accused facing trial by jury, provided that the Prosecution have complied with their primary disclosure duty, and is optional for an accused facing a summary trial. A defence statement must be served on the prosecution within 14 days of primary disclosure being made.
3. Secondary disclosure – as soon as is reasonably practicable following receipt of a defence statement, the prosecution has to provide details of any additional information which had not previously been disclosed and which might reasonably be expected to assist the accused’s defence as set out in the defence statement.

2. In addition, the Code of Practice provides that following a conviction, all material which was relevant to the investigation must be retained for periods which can be broadly outlined as:

1. in the case of a custodial sentence, until six months after the conviction or until that sentence is completed, whichever is the later;
2. in the case of a non-custodial sentence which is to run for a particular period (e.g. a probation order), until that sentence has ended.

3. The Act will create additional work for the Official Receiver (OR), who will be required to provide a detailed analysis of material which comes into his possession, or is generated during the course of his dealing with a case, when submitting prosecution reports to the Service’s Headquarters. That analysis will include details of an insolvent’s accounting records, books, papers, etc. Where a criminal investigation/prosecution results from a prosecution report submitted by the OR, material relevant to the investigation will include all books, records, papers, documents etc mentioned above. Following a conviction the OR will have to retain such "relevant material" in line with paragraph 2 above.

The effect on insolvency practitioners

4. Where such records etc have been handed over to an insolvency practitioner (IP), the requirements imposed on the OR above will not be extinguished. The Act itself does not impose requirements upon IPs to maintain and list insolvent’s records, documentation etc and there is no alteration to the existing policy of handing an insolvent’s accounting records to an IP appointed as trustee or liquidator of the insolvent’s estate.
5. The Act places no obligation upon IPs to either retain material or to reveal its existence to an investigator or prosecutor, but it is likely that such requests will be made by investigators. If an investigator believes that an IP may be in possession of material that may be relevant to the investigation, the IP will be notified that an investigation is taking place and will be invited to retain the material in case they receive a request for its disclosure. An accused person may also request access to, or information on, material held by practitioners.
6. In view of the requirements imposed upon the OR outlined in paragraph 3 above, it is essential that an insolvent’s books, papers, etc are accurately maintained, notwithstanding that the material may be in the possession of an IP. Accordingly, IPs are requested wherever possible, to maintain an insolvent's accounting records, etc in the same format in which they are collected, e.g. records should not be re-boxed unless absolutely necessary. Where an IP feels that the records must be re-boxed or re-organised in order to assist his administration, it would assist if a file note could be kept amongst the practitioner’s working papers, recording the date that re-boxing etc occurred, and a brief explanation of the reason why it was required.

5.    Civil Procedure Rules 1998

New Civil Procedure Rules (CPR) were introduced on 26 April 1999. This will necessitate some amendment of insolvency secondary legislation in areas where that legislation currently makes reference to, and is dependent for its operation on, the Supreme Court Rules or the County Court Rules. General references to the existing court rules will be replaced with reference to the corresponding new rules. Where currently used terms will cease to be used under the CPR (i.e. discovery) they will be replaced by the new term (i.e. disclosure). There will be two new statutory instruments - the Insolvency (Amendment) (No.2) Rules 1999, and the Insolvent Companies (Disqualification of Unfit Directors) Proceedings Rules 1999 - these have been available from HMSO since 16 April 1999.

Practitioners should note that the provisions of the CPR will only apply to insolvency proceedings to the extent that they are consistent with the Insolvency Rules.

(Enquiries arising from the above should be addressed to Richard Favier on 020 7637 6421).

The statutory right for small businesses to claim interest from larger businesses and public sector bodies from 1 November 1998 will have implications for practitioners dealing with proofs of debt and book debts in insolvencies. The Late Payment of Commercial Debts (Interest) Act 1998 provides the right to claim interest when payment is made after the agreed credit period, or 30 days if no credit period has been agreed. The interest rate will be set at 8% above the Bank of England base rate.

This article seeks to provide information about a change to the status of (some) student loans in the context of bankruptcy.

The student loans regime changed with the enactment of the Teaching and Higher Education Act 1998 and the Education (Student Support) Regulations 1999 which came into force on 3 March 1999.

Where a student loan is made under the 1999 regulations, it shall not be claimed as part of the bankrupt's estate, either as vesting property, or after acquired property, or as part of an income payment order. An outstanding loan is now not excluded from being a bankruptcy debt, and so will be released on the discharge of the bankrupt.

Therefore where at the date of a bankruptcy order the bankrupt has an outstanding debt in respect of a student loan made under the new arrangements, it should be scheduled as a debt in the usual way, with the Student Loans Company Limited of 100 Brothwell Street, Glasgow G2 7JD being added to the list of creditors. This company will submit a claim in cases when the loan was made under the Student Support Scheme but will not submit a claim where the loan was made under the old Student Loans Scheme, i.e. under the former arrangements.

The deciding factor is the scheme under which the loan was made, not the date in which, the new regulations came into force, namely 3 March 1999.

8.    Data Protection Act 1998. How we collect and use information?

Under the Data Protection Act 1998 (the Act) persons who process personal data ("Data Controllers") are obliged to tell the people they have information on ("Data Subjects") certain details about the data held. This article complies with that obligation with regard to the personal data held by the Service relating to Insolvency Practitioners (IPs).

Individual Official Receivers (ORs) and the Secretary of State (SoS) are Data Controllers for the purposes of the Act. Practitioners should also be aware that under the terms of the legislation they may also be "Data Controllers".

ORs and the Service hold information about current and former IPs, and applicants to the SoS for authorisation as IPs, for the purposes of recording details of trustees and liquidators, and also for registration and authorisation purposes.

The Service may check information provided by individual IPs, or by a third party, with other information held in-house. Information may also be passed to third parties in order to check its accuracy, or for regulatory or enforcement purposes.

As data subjects, individual IPs are entitled to know what information ORs/the SoS hold about them. The Service is not however required to disclose information which would be likely to prejudice the proper discharge by The Service of functions designed to protect members of the public against dishonesty, or other serious misconduct.

Any IP wishing to know more about the information held about him or her, or the purposes for which it is held, should contact the Data Protection Liaison Officer (DPLO) at Insolvency Practitioner Section, 21 Bloomsbury Street, London, WC1B 3QW. The DPLO will respond with full details of the type of information that can be provided. The DPLO will also provide a standard data request form for completion and return, together with payment of the relevant fee and appropriate form of identification. Upon receipt of the completed request form and fee the DPLO has 40 days in which to deal with the request. The IP should inform the DPLO, in writing, of any inaccuracy in the information provided.

9.    Introduction of Some of the Pensions and Bankruptcy Provisions of the Welfare Reform and Pensions Act 1999

The following provisions of the Welfare Reform and Pensions Act 1999 came into force on 29 May 2000 and will not apply retrospectively:-

Section 11 (1), (2), (3) and (11);
Section 13 (1) and (2);
Section 18 (so far as it relates to paragraph 1 and 2 of Schedule 2); and
Schedule 2 – paragraph 1 and 2

Section 11 (12) of the Act will come into force on 1 December 2000.

Section 11 excludes all right under ‘approved pension arrangements’ (as defined in that Section) from the bankrupt’s estate. Section 11 will apply to proceedings where the bankruptcy petition was presented on or after 29 May 2000.

The new provisions will not affect the making of income payments orders under Section 310 of the Insolvency Act 1986 or Section 32(2) of the Bankruptcy (Scotland) Act 1985. Pensions payments can be taken into account when calculating a bankrupt’s income for the purposes of an income payment order.

Regulations that will allow the recovery of excessive contributions from protected pensions and to protect less common types of pensions from seizure on bankruptcy should be introduced early in the next session of Parliament.

10. EC Regulation on Insolvency Proceedings

GUIDANCE NOTES 

                    Part I – An Overview of the Regulation 

                    Part II – Flowcharts of Certain Procedures & Provisions 

                    Part III – Legislative Changes

PART I – An Overview of the Regulation

1.            Background

The EC Regulation on insolvency proceedings (“the Regulation”) was adopted by the Council of the European Union on 29 May 2000 and comes into force throughout the EU on 31 May 2002.  (In fact, Denmark is not a party to the Regulation and where in this document reference is made to the EU or its member states that excludes Denmark).  The purpose of the Regulation is to improve the efficiency and effectiveness of insolvency proceedings with a cross-border dimension by either simplifying or removing formalities previously associated with recognition and enforcement.  The Regulation is not an attempt to harmonise the insolvency laws of the individual member states but rather it provides a framework within which the different insolvency regimes can interact with more predictable outcomes.

Unlike an EU directive, the Regulation does not need to be implemented by the member states.  It is directly applicable and becomes an integral part of each member state’s law.  The Regulation will prevail in the event of any incompatibility with the national law. However, in order to ensure that the Regulation will be fully workable and enforceable in the United Kingdom, a small number of amendments will be made to both primary and secondary insolvency legislation.  An indication of the changes likely to be made in relation to England and Wales (the corporate primary legislation changes will also apply in relation to Scotland) are given in Part III of this document. 

2.            Scope of Application

The Regulation applies only where a debtor has his centre of main interests (see recital 13) within the EU and deals only with jurisdiction within the EU .  It is applicable to collective insolvency proceedings in relation to individuals and legal persons, but not to insurance undertakings, credit institutions (for which separate directives are to be implemented) and certain investment undertakings (article 1).  To be covered by the Regulation, member states’ insolvency proceedings must not only comply with the general provisions of article 1.1, they must also be listed in Annex A and/or B to the Regulation.  For the purposes of the Regulation, the United Kingdom represents one jurisdiction and includes Gibraltar.   The relevant proceedings in relation to the United Kingdom are:

• Winding up by or subject to the supervision of the court

• Creditors’ voluntary winding up (with confirmation by the court)

• Administration

• Voluntary arrangements under insolvency legislation

• Bankruptcy or sequestration 

A creditors’ voluntary winding up will not enjoy the benefits of automatic recognition and enforcement without a formal confirmation by the court.  A new procedure will be put in place for this purpose (see Part III). 

The Regulation does not apply to receiverships – administrative or otherwise.  The insolvency of the debtor is a prerequisite for recognition and consequently the Regulation does not apply to members’ voluntary winding up or to winding-up orders made solely on just and equitable grounds. 

The Regulation has no retrospective effect.  Under article 43, it applies only to relevant insolvency proceedings opened (see article 2(f)) on or after 31 May 2002.  Acts done by the debtor before that date will continue to be governed by the law which was applicable to them at the time they were done. 

3.            Proceedings under the Regulation

Article 3 of the Regulation permits member states’ courts (defined for these purposes more broadly than usual - see article 2(d)) to open two types of insolvency proceedings. 

Main Proceedings.  These can be opened only in the member state where the debtor has his “centre of main interests” (the place where he conducts the administration of his interests on a regular basis and which is consequently ascertainable by third parties – recital 13).  Subject to the existence or subsequent opening of territorial proceedings (which largely oust the jurisdiction of main proceedings in the member state where the territorial proceedings are opened) main proceedings have universal effect throughout the EU. 

Territorial Proceedings.  These can be opened in any member state in which the debtor has an establishment (defined in article 2(h) of the Regulation as “any place of operations where the debtor carries out a non-transitory economic activity with human means and goods”). Their effects are restricted to those assets situated (see article 2(g)) in that member state.  Where such proceedings are opened after main proceedings, they are termed secondary proceedings and can only be winding-up proceedings (listed in Annex B), and not rescue or rehabilitation proceedings. 

From a United Kingdom perspective, a number of important changes flow from this.  Firstly, the wide jurisdiction which United Kingdom courts have asserted to open insolvency proceedings in relation to debtors whose centre of main interests is not in the United Kingdom will be restricted.  Secondly, the scope to request the opening of territorial proceedings before the opening of main proceedings is limited to those creditors established in that state or whose claim arises directly from the operation of the establishment (article 3.4).  Finally, the reach of the “liquidator” (the term the Regulation uses for the insolvency officeholder – see Annex C) in territorial proceedings is restricted to those assets situated in the member state where the proceedings were opened, irrespective of whether or not main proceedings have been opened in relation to the debtor. 

4.            The Law Applicable

Under the Regulation, the general rule is that the national law of the state in which the proceedings are opened is the applicable law and it is that law that determines the conditions for the opening, conduct and closure of the proceedings.  Article 4.2 contains a non-exhaustive list of the matters to be determined by the law of the proceedings.  Importantly, however, the Regulation contains a number of substantive conflict of laws provisions.  These are exceptions to the general rule and have the effect of subjecting situations where, for example, property is, or parties are, situated in a member state other than that in which the insolvency proceedings have been opened to laws other than that of the proceedings.  Clearly it would be impractical to explore these complex provisions in any detail in guidance of a general nature, but the conflict provisions apply in the following areas :- 

1. Creditors or third parties holding secured (or “in rem”) rights over assets (article 5).
2. Set off (article 6).
3. Reservation of title (article 7).
4. Contracts relating to immovable property (article 8).
5. Rights and obligations in relation to payment or settlement systems or financial markets (article 9).
6. Employment contracts and relationships (article 10).
7. Effect of insolvency proceedings on debtor’s rights in immovable property, ships or aircraft subject to registration in a public register (article 11).
8. Community patent, trade mark or similar rights (article 12).
9. Voidness, voidability or unenforceability of detrimental acts (article 13).
10. Protection of third party purchasers of immovable or registered assets (article 14).
11. Effect of insolvency proceedings on pending lawsuits concerning assets or rights of which the debtor has been divested (article 15).

5.            Recognition of Insolvency Proceedings

Currently the process of obtaining recognition from a foreign court can be slow and costly and consequently be detrimental to the interests of creditors.  The Regulation makes major advances in the areas of international recognition of insolvency proceedings and the exercise abroad of the liquidator’s powers. 

In future, proceedings opened under the Regulation will be recognised without any formality in all member states, subject only to normal public policy considerations (articles 16 and 26).  Main proceedings will become immediately effective in all member states as long as no territorial proceedings have been opened there (article 17).  Subject to the same condition, the liquidator appointed in main proceedings will immediately be able to exercise his powers in other member states and even the liquidator in territorial proceedings will be able to act to recover assets removed to another member state after the proceedings for which he was appointed were opened.  At all times the liquidator must comply with the general law of the member state in which he intends to take action, but a certified copy of his appointment (with an appropriate translation) is all that he will need to be able to act (articles 18 and 19). 

Historically, insolvency is an area that has been excepted from the ambit of the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters.  Now, under article 25 of the Regulation, certain specified judgments of the court which has opened insolvency proceedings will also be recognised without formality and fall to be enforced in accordance with the Brussels Convention. 

The Regulation contains substantive provisions dealing with the position of creditors who have obtained payment after the opening of insolvency proceedings, as well as by way of distribution in other insolvency proceedings (article 20) and the effectiveness of discharge of third party obligations after the opening of proceedings (article 24).  So as to achieve greater certainty in these areas, liquidators are permitted to publish notice of the judgment opening their proceedings in other member states (article 21).  The liquidator in main proceedings is also authorised to request registration of the judgment in the public registers (for example, the Land Register) in other member states. 

6.            Secondary Insolvency Proceedings

For the purpose of improving the efficiency and effectiveness of insolvency proceedings which have cross-border effects, the Regulation provides a structure for the interaction of multiple insolvency proceedings in relation to the same debtor.  

The Regulation affords primacy to main insolvency proceedings and the opening of such proceedings will serve as proof of the debtor’s insolvency for the purposes of opening secondary insolvency proceedings.  To achieve this primacy the Regulation not only imposes a duty on liquidators to cooperate with and communicate information to each other, it also provides the liquidator in main proceedings with a range of powers in relation to secondary proceedings.  He is empowered to – 

• request the opening of secondary proceedings (article 29)
• request the stay of the process of realisation of assets in secondary proceedings (article 33)
• propose a rescue plan or composition in secondary proceedings (article 34)
• request that pre-existing territorial proceedings be converted into winding-up proceedings (article 37).

Where territorial insolvency proceedings have been opened before main proceedings, following the opening of main proceedings they are thereafter to be treated as secondary proceedings insofar as the progress of those proceedings allows (article 36). 

7.            Information for Creditors and Proving of Claims

The Regulation’s provisions in relation to the provision of information to creditors and the proving of claims are generally straightforward but occasionally novel. 

Any creditor whose habitual residence, domicile or registered office is in an EU member state is entitled to prove his claim in insolvency proceedings opened in another member state (article 39).  Such creditors are to be given notice of the opening of proceedings and of any specific requirements or provisions of the particular member state relating to the process of proving claims (article 40).  This notice has to be accompanied by a form indicating that it includes an invitation to lodge a claim and that there are time limits to be observed. That information is to be given in all the official languages of the institutions of the European Union (see schedule A). Creditors are required to provide appropriate information and documentation to support their claims (article 41).  Under article 42, creditors are permitted to use their native language when proving their claims, but they can be required to provide a translation into the language of the state in which the proceedings were opened. 

The novel aspect of the Regulation in relation to proving of claims is that, not only are liquidators in both main and secondary proceedings empowered to participate in other proceedings on the same basis as the creditor, they can also prove the claims which have been proved in proceedings for which they were appointed in other insolvency proceedings (article 32).

SCHEDULE A

Headings in all the official languages of the forms provided by Article 42 of Council Regulation (EC) No 1346/2000 of 29.5.2000, OJ L 160, p.12.

(es, da, de, el, en, fr, it, nl, pt, fi, sw)

ART.42 (1):

«Convocatoria para la presentación de créditos. Plazos aplicables».
»Opfordring til anmeldelse af fordringer. Vær opmærksom på fristerne«
„Aufforderung zur Anmeldung einer Forderung. Etwaige Fristen beachten!“
«Προ΄σκληση για αναγγελι΄α απαιτη΄σεως. Προσοχη΄ στις προθεσµι΄ες»
‘Invitation to lodge a claim. Time limits to be observed’
«Invitation à produire une créance. Délais à respecter»
«Invito all’insinuazione di un credito. Termine da osservare»
„Oproep tot indiening van schuldvorderingen. In acht te nemen termijnen”
«Aviso de reclamação de créditos. Prazos legais a observar»
”Kehotus saatavan ilmoittamiseen. Noudatettavat määräajat”
”Anmodan att anmäla fordran. Tidsfrister att iaktta”

ART.42 (2):

«Presentación de crédito»
»Anmeldelse af fordring«
„Anmeldung einer Forderung“
«Αναγγελι΄α απαιτη΄σεως»
‘Lodgement of claim’
«Production de créance»
«Insinuazione di credito»
„Indiening van een schuldvordering”
«Reclamação de crédito»
”Saatavaa koskeva ilmoitus”
”Anmälan av fordran”

PART II - Flowcharts of Certain Procedures & Provisions

Download/View in Word format

Download/View in PDF format

PART III  - Legislative Changes

Since the Regulation is directly applicable, it does not need to be implemented by the EU member states. Where there is any conflict between the Regulation and national law, the Regulation will prevail. However, it will be necessary to make some limited changes to both primary and secondary insolvency legislation in the UK to ensure that the Regulation will be fully workable and enforceable. Details of the areas to be covered in the relation to England and Wales are provided below. 

Insolvency Act 1986 

The Regulation’s impact is likely to be noticed most in two areas – (1) jurisdiction to open insolvency proceedings and (2) the property that is capable of being dealt with in those proceedings. Accordingly, the Act’s jurisdictional provisions (sections 117, 120, 221, 225 and 265) will be amended as necessary and new provisions will be introduced to modify the definition of “property” in section 436. A number of other definitional provisions will be introduced and the rule-making powers in sections 411 and 412 will be extended to enable rules to be made to give effect to the Regulation. 

Insolvency Rules 1986 

A range of amendments to the Rules will be needed, primarily to ensure that – 

a)      the question of the Regulation’s applicability (or not) is addressed at the stage when the opening of insolvency proceedings is contemplated; and 

b)     appropriate effect is given to the extensive role that the Regulation gives to member state liquidators in the insolvency process. In particular, provision will be made to deal with applications for the conversion of territorial administration and voluntary arrangement proceedings into winding-up proceedings. 

Provision will also be made for applications by liquidators for confirmation by the court of creditors’ voluntary winding-up proceedings. Such confirmation will be required for the proceedings to be recognised and (where applicable) enforceable in other EU member states. 

As a result of the Regulation, a number of the statutory forms (relating primarily to the opening of insolvency proceedings) will require to be modified. A limited number of new forms may also need to be introduced.

General enquiries may be directed to policy.unit@insolvency.gov.uk

Telephone: 0207 291 6740

11. PENSIONS UNDER THE WELFARE REFORM AND PENSIONS ACT 1999

Welfare Reform and Pensions Act 1999 (Commencement No 13) Order 2002 

The Welfare Reform and Pensions Act 1999 (Commencement No 13) Order 2002 [SI 2002/153(C3)] came into force on 6 April 2002.  The following are the main provisions that are now brought into force in the Welfare Reform and Pensions Act 1999 (WRPA 1999):- 

• Section 11(4) to (10) – the effect of bankruptcy on pension rights: approved arrangements, as far as not already in force.
• Section 12 – the effect of bankruptcy on pension rights for unapproved Arrangements, as far as not already in force (see also article 12 on the Regulations below)
• Section 13 – as far as not already in force, and applies to Scotland the provisions of Sections 11 and 12.
• Section 14 – provides that rights under pension schemes cannot be forfeited on bankruptcy.
• Section 15 – introduces Sections 342A to 342C into the Insolvency Act       1986, so far as not already in force.  The trustee in bankruptcy may recover excessive pension contributions. 
• Section 16 – as far as not already in force, applies in Scotland and amends Sections 36A to 36C of the Bankruptcy (Scotland) Act 1985.  Excessive pension contributions may be recovered where a debtor’s estate is sequestrated.
• Paragraphs 67 –72 of Schedule 12 – introduce Sections 342D to 342F into the Insolvency Act 1986.  The trustee may seek to recover excessive pension contributions from a bankrupt’s ex-spouse where the pension has previously been shared on divorce.

(Article 9 on page 17.6 first published in Dear IP no. 50, June 2000 provided information on the introduction of parts of the WRPA 1999 on 29 May 2000, principally Section 11(1) and (2) of that Act. Section 11(1) provides that any approved pension arrangement is excluded from the bankruptcy estate in cases where the bankruptcy order was made on a petition which was presented on or after 29 May 2000. (Section 13 WRPA 1999 came into force on that date and applied Section 11 to Scotland.))  

12.   The Occupational and Personal Pension Scheme (Bankruptcy) (No 2) Regulations 2002

The Occupational and Personal Pension Scheme (Bankruptcy) (No 2) Regulations 2002 [SI 2002/836] came into force on 6 April 2002.  The main provisions are as follows:

• Regulation 2 – prescribes those arrangements that will be ‘approved pension arrangements’ and are excluded from a bankrupt’s estate by Section 11 of the WRPA 1999.  This is in addition to the arrangements already excluded from a bankrupt’s estate by Section 11(2) WRPA 1999 (which came into force on 29 May 2000).    (Regulation 11 applies Regulation 2 to Scotland.)

• Regulation 3 (for England and Wales) and Regulation 12 (for Scotland) – prescribe the types of unapproved pension arrangements that can be considered under Section 12 WRPA 1999 and the conditions that must be met for them to be excluded from a bankrupt’s estate. 

• Regulations 4,5 and 6 (for England and Wales) and Regulations 13, 14 and 15 (for Scotland) - Unapproved pension arrangements may in some circumstances be excluded from a bankrupt’s estate. To do so the bankrupt must either apply to the court for an exclusion order or make a qualifying agreement with his trustee in bankruptcy. Time limits apply to the making of such an application and entering into such an agreement, which may be extended by the court.    

General enquiries may be directed to policy.unit@insolvency.gov.uk

Telephone: 0207 291 6740

13.   The Occupational Pension Schemes (Winding Up Notices and Reports etc) Regulations 2002 

The Occupational Pension Schemes (Winding Up Notices and Reports etc) Regulations 2002[S.I 2002/459] came into effect on 1 April 2002.  Regulation 3(1) introduces a time limit for the appointment of an independent trustee.  Regulation 8 introduces procedures for the modification of a pension scheme to ensure that the scheme is properly wound up. 

Appointment of an independent trustee

Section 23(2) of the Pensions Act 1995 now requires IPs to appoint an independent trustee within three months of either: 

a)   the date the IP first became aware that he had a duty to appoint an independent trustee or

b)   the date that the duty arose,  

whichever is the later.

While the legislation does not impose a penalty for any failure to appoint an independent trustee, IPs are reminded that where an office holder neglects or refuses to carry out his duty to make an appointment, any scheme member can apply (under section 24 of the 1995 Act) for a court order forcing him to deal with the matter.  The Occupational Pensions Regulatory Authority (OPRA) will also consider reporting any failure to appoint an independent trustee to an IP's authorising body. 

Application to OPRA to modify pension scheme

The trustees or managers of a scheme may apply to OPRA for the scheme to be modified to ensure that it is properly wound up.  Where the employer is subject to an insolvency procedure and an application is made which would reduce the amount that might be distributed to the employer on winding up, the office holder must be given notice.  The office holder may make representations to OPRA within one month of the date of the notice. 

General enquiries may be directed to policy.unit@insolvency.gov.uk

Telephone: 0207 291 6740

14.   Secure Register for Home Addresses 

IPs' attention is drawn to The Companies (Particulars of Usual Residential Address)(Confidentiality Orders) Regulations 2002 and The Limited Liability Partnerships (Particulars of Usual Residential Address)(Confidentiality Orders) Regulations 2002, The Limited Liability Partnerships (Competent Authority) (Fees) Regulations 2002 and The Companies (Competent Authority) (Fees) Regulations 2002, which came into effect on 2 April 2002. A copy of a letter from Registrar of Companies to The Insolvency Service giving details of the new provisions is set out on the following page. 

The registrar is at present working on the verification of competent authority procedures and guidance, which should be available shortly.  In the meantime, the Administrator of the Secure Register asks that verification requests from IPs are only made if a search of the public register reveals an officer whose address is described as a "service address". 

Extract of letter sent to The Insolvency Service by the Registrar of Companies 

DIRECTORS HOME ADDRESS – PROPOSED NEW REGULATIONS  

“The Regulations are The Companies (Particulars of Usual Residential Address) (Confidentiality Orders) Regulations 2002 and The Limited Liability Partnerships (Particulars of Usual Residential Address) (Confidentiality Orders) Regulations 2002. 

The new Regulations will enable officers and permanent representatives or a person who lives with them of a company and members of a Limited Liability Partnership who consider that they are at serious risk of violence or intimidation to apply for a Confidentiality Order. If a Confidentiality Order is granted the statutory requirement under the Companies Act 1985 and the Limited Liability Partnerships Act 2000 to disclose the usual residential address for the public record is disapplied. Instead, a service address may be filed for the public record and the usual residential address will be held on a Secure Register. 

Information held on the Secure Register would not be made available to the public under the Regulations. However, as a Competent Authority provided for in the Regulations this restriction will not apply to your organisation. Under the Regulations, every Insolvency Practitioner is entitled to access to information on the Secure Register. 

The Regulations require us to have secure and resilient procedures in place to ensure that secure information is provided only to organisations and individuals entitled and authorised to receive the information. We need to put arrangements in place with individual Insolvency Practitioners for us to carry out certain verification procedures before supplying this information so that we can be sure that the information is provided only to those persons entitled to an authorised to receive it.  

Under the Regulations it is an offence to disclose secure information to another party, except under the circumstances described in the Regulations. A person guilty of such an offence will be liable to criminal prosecution. It is vitally important, therefore, that the people authorised to receive this information are fully aware of the requirements of the Regulations and the penalties for failure to observe those requirements.  

A fee of £50 will be payable to cover the costs of carrying out the initial verification checks and establishing secure arrangements for providing this information to your organisation or to authorised individuals within your organisation. A fee of £4 is then payable for the provision of each individual address requested thereafter. 

We will carry out verification checks each time information is requested so that we can be sure that we are only providing information to authorised persons."

Urgent enquiries may be addressed to The Administrator, PO Box 4082, Cardiff, CF14 3WE. Tel 0845 3032400.

Dear IP no 7 of April 2002 drew IPs' attention to provisions for a new secure register for home addresses. The Registrar has recently issued guidance on the procedures for the verification of competent authorities.

The Companies (Particulars of Usual Residential Address) (Confidentiality Orders) Regulations 2002 came into force on 2 April 2002, together with almost identical legislation for Limited Liability Partnerships. This legislation removes the requirement for company secretaries, directors, permanent representatives of foreign companies registered in the UK and members of Limited Liability Partnerships, granted a confidentiality order, to notify their usual residential address to the Registrar of Companies for the public record.

In essence, beneficiaries of a confidentiality order should provide companies/limited liability partnerships, to which they are appointed, with a service address for the public record and changes to their usual residential address for the confidential record. A service address will be clearly denoted as such on the public record. Access to usual residential address information on the confidential record, held by the Registrar of Companies, is limited to those "Competent Authorities" listed in the regulations. Competent authorities include insolvency practitioners.

An IP accessing usual residential information from confidential records, held by the Registrar of Companies, should be mindful of the disclosure prohibitions outlined in regulation 14 of The Limited Liability Partnerships (Particulars of Usual Residential Address)(Confidentiality Orders) Regulations 2002 and The Companies (Particulars of Usual Residential Address)(Confidentiality Orders) Regulations 2002.  In light of regulation 14, and prohibited disclosure being an offence under regulation 17, IPs
should consider whether to seek legal advice before divulging information.

To request information from the confidential record a competent authority must first nominate an address, or addresses, or an individual, or individuals, or a combination as points of contact for the receipt of information. The point of contact must be notified using the appropriate form. The form should be sent, together with a cheque for £50 per location nominated, or £50 per individual nominated, to the Administrator, PO Box 4082, CF14 3WE. There is an additional fee of £4 for each beneficiary’s usual residential address requested. On receipt of the completed form, the nominated point of contact, whether an individual or an address, must be verified to ensure it is genuine.

Once verified the registrar will provide a statement confirming how, when and from where the competent authority may obtain usual residential address information from the confidential record. The statement, called a determination, also contains details of the validation and security procedures.

The Administrator, on behalf of the Registrar of Companies, will be overseeing the process and will provide the appropriate forms, notes for guidance and a draft example of a standard determination. Please refer any queries to the Administrator, PO Box 4082, CF14 3WE, or telephone 0845 3032400.

General enquiries may be directed to policy.unit@insolvency.gov.uk

Telephone: 0207 291 6740

1. The Financial Services and Markets Act 2000 (FSMA) came into force on 1 December 2000, establishing the Financial Services Authority (FSA), as the single regulator in the financial services industry for authorising and regulating those types of business. Businesses authorised and regulated under the Act include:

• Banks
• Building societies
• Insurance companies
• Friendly societies
• Credit unions
• Society of Lloyd's
• Investment advisers
• Stockbrokers
• Professional firms offering certain types of investment services
• Fund managers
• Derivatives traders

This list is intended to be illustrative rather than definitive. Regulated activities are not defined in FSMA itself but are listed in the Financial Services and Markets Act (Regulated Activities) Order 2001 SI 2001/544. This Order is amended from time to time to reflect the regulation of new categories of activity, but an up to date version of the Order, as currently amended, can be found on the Treasury website.

2. The FSMA coordinates and modernizes the financial regulatory arrangements that were established and previously operated under a number of different enactments (see page 17.28 for list) and replaces ten different sectoral regulators with a single regulator (the FSA) covering the whole financial services sector. It also introduced a single compensation scheme for consumers. The ten sectoral regulators are:

• The Supervision and Surveillance Division of the Bank of England
• The Securities and Investments Board (SIB)
• The Personal Investment Authority (PIA)
• The Investment Management Regulatory Organisation (IMRO)
• Securities and Futures Authority (SFA)
• The Building Societies Commission
• The Friendly Societies Commission
• The Registry of Friendly Societies
• HM Treasury (formerly DTI) Insurance Division
• UK Listing Authority (UKLA), which was formerly part of the London Stock Exchange

3. The FSMA 2000 gives the FSA powers to ask the courts to wind up, or initiate other insolvency procedures against authorised (and certain other) persons. It also enables the FSA to be heard by the court when other parties commence such proceedings.

4. Insolvency impacts on the regulation of financial services businesses in two ways. First, there are implications for existing customers if a financial service business becomes insolvent. Second, winding up may itself be part of the appropriate regulatory response to events. It may be desirable to wind up a company to protect the interests of existing customers and also those who might otherwise do business with it in future, if it continued to trade. Subject to the particular provisions of Part VII of the Companies Act 1989 for transactions carried out on regulated markets e.g. by those who trade on the Stock Exchange, the general law of insolvency applies, and will continue to apply, to most financial services businesses, as it does to other businesses. However, it is supplemented by provisions that allow the FSA to petition the court for the winding up of an authorised business either on the grounds of insolvency or that it would be just and equitable.

5. The insolvency provisions of the Act establish so far as is practicable, a common approach across all sectors. Sections 359, 367, 372 and 375 provide the FSA with the power to ask the court to initiate various insolvency procedures. Sections 356, 357, 362, 363, 365, 371 and 374 make clear that the FSA has the right to be heard by the court in insolvency proceedings instigated by other parties.

6. Sections 369, 376, 377, 378 and 379 of FSMA carry forward provisions of the Insurance Companies Act 1982 dealing with the insolvency of insurance companies (which because of the particular nature of insurance business, must in some respects be dealt with in a different way to other authorised persons). However, certain changes have been made and they are set out in sections 360 and 366.With effect from 1 December 2001 the Insurers (Winding Up) Rules 2001 replaced the Insurance Companies (Winding Up) Rules 1985. The new rules are largely unchanged in substance, although they make a number of changes to the way in which policies are valued, primarily in schedules 1 – 5.

7. At the same time a number of gaps in the coverage of the predecessor regimes will be filled. Section 359 will allow the FSA to ask the court to make an administration order in respect of authorised businesses, as an alternative to winding up. Section 372 will give the FSA powers to petition the court to declare bankrupt an insolvent trader providing financial services. The FSA previously had such a power in respect of some kinds of authorized businesses, but not in others.

8. The special winding-up regime for banks contained in the Banking Act 1987 remains in place. Similarly the winding up regimes for mutual societies which include building societies, friendly societies or industrial and provident societies remain in the Building Societies Acts 1986 and 1997, the Friendly Societies Acts 1974 and 1992, and the Industrial and Provident Societies Act 1965. These arrangements did not change on the coming into force of FSMA, as section 355(1)(b) expressly provides that Part XXIV of the Act is not to apply to building societies, to friendly societies or to industrial and provident societies.

9. The FSA were required by Part XV of FSMA to set up a statutory scheme for the payment of compensation (The Financial Services Compensation Scheme) to consumers who suffer financial loss as a consequence of the inability of an authorised person to meet its liabilities (see page 17.29). The scheme replaces previous sectoral compensation schemes.

10. A number of consequential amendments have been made to the Insolvency Act 1986, the Insolvency Rules 1986 and the Company Directors Disqualification Act 1986 pursuant to the Financial Services and Markets Act 2000 (Consequential Amendments and Repeals Order 2001, SI 2001/3649). A table of some of those amendments and their effect is set out at the end of this article on page 17.30 Certain other enactments have also been repealed, or substantially repealed, including the Policyholders Protection Acts 1975-97, the Industrial Assurance Acts 1923-48 and the Insurance Brokers (Registration) Act 1977.

The FSA’s address is: -

Financial Services Authority
25 The North Colonnade
Canary Wharf
London E14 5HS

Tel: 020 7676 1000

www.fsa.gov.uk

Full information on the Financial Services and Markets Act 2000 can be found on the HM Treasury website:

Amendments have been made, by the FSMA, to the financial regulatory arrangements previously established and operated under the following enactments, although not all of the Acts have been fully repealed:

• the Industrial Assurance Act 1923
• the Industrial Assurance and Friendly Societies Act 1948
• the Industrial and Provident Societies Act 1965
• the Insurance Brokers (Registration) Act 1977
• the Credit Unions Act 1979
• the Insurance Companies Act 1982
• the Financial Services Act 1986
• the Building Societies Acts 1986 and 1997
• the Banking Act 1987
• the Friendly Societies Act 1992

With effect from 1 December 2001 the Insurers (Winding Up) Rules 2001 replaced and repealed the Insurance Companies (Winding Up) Rules 1985 but the content remains substantially the same.

The Financial Services and Markets Compensation Scheme is operated under the auspices of the Financial Services Authority. The new body is responsible for compensation schemes in relation to:

• deposits - 100% of the first £2000 and 90% of the next £33,000 (total £31,700)
• investments - 100% of the first £30,000 and 90% of the next £20,000 (total £48,000)
• insurance
• Compulsory – covered in full
• Non-compulsory – 100% of the first £2000 of a claim or policy, and 90% of the remainder of the claim or value of the unused premiums,
• Long term – 100% of the first £2000, and 90% of the remainder of the value of the policy.

Contact details for compensation scheme:

Financial Services Compensation Scheme
7^th Floor Lloyds Chambers
Portsoken Street
London
E1 8BN

Tel. 020 7892 7300

This table shows the effects on those provisions in Insolvency legislation of interest to IPs by the Financial Services and Markets Act 2000 (Consequential Amendments and repeals Order 2001, SI 2001/3649).

17.   Late Payment of Commercial Debt – New Provisions

The Late Payment of Commercial Debts (Interest) Act 1998 provides the right to claim interest, on qualifying debts, when payment is made after the agreed credit period, or at the end of 30 days if no credit period has been agreed. The interest rate was set at 8% above the Bank of England base rate (SI 2002/1675). Under the Act small business have been able to claim such interest from large businesses and the public sector since 1 November 1998 and from other small businesses since 1 November 2000.

From 7 August 2002 all businesses and the public sector will be able to claim late payment interest from all other businesses and the public sector under the provisions of The Late Payment of Commercial Debts Regulations 2002. The rate of interest claimable will remain 8% over the Bank of England base rate, but will now be calculated using the rate in force on 30 June or 31 December immediately before the day when the interest starts to run.

A new right for the creditor to claim compensation for the costs suffered by suppliers arising from late payment has been introduced. This is a fixed amount based on the size of the unpaid debt, as follows:

These new rights apply only to contracts made on or after 7 August 2002.

Any enquiries about this article should be referred to Policy Unit on 020 7291 6740

18.   INSOLVENCY ACT 2000 - VOLUNTARY ARRANGEMENT PROVISIONS AND OTHER AMENDMENTS 

1.The voluntary arrangement provisions of the Insolvency Act 2000 come into force on 1 January 2003.They will make it easier for small companies and partnerships in financial difficulty to make voluntary arrangements with their creditors by providing the option of a short moratorium to give the firm's management time to put a rescue plan to creditors.  Technical improvements to the existing company and individual voluntary provisions will also come into effect on that day.

2. The provisions are:

Section 1 and Schedule 1 which provide for small companies in financial difficulty to make voluntary arrangements with their creditors by providing the option of a moratorium to give the firm's management time to put a rescue plan to creditors (Company Voluntary Arrangement moratorium)(see Annex A). 

Section 2 and Schedule 2:which provide for technical improvements to the existing company voluntary arrangement procedure and make amendments to the Building Societies Act 1986 (see Annex B). 

Section 3 and Schedule 3: which provide for technical improvements to the existing individual voluntary arrangement procedure (see Annex C). 

Section 4: modifications to who can be the nominee/supervisor of a voluntary arrangement. 

Section 15 and Schedule 5: minor amendments/repeals (to the extent that they are not already commenced). 

3. The criteria determining which companies are eligible for a moratorium (paragraphs 2 – 4 of Schedule A1 to the Insolvency Act 1986) have been amended since the Insolvency Act 2000 received Royal Assent. The Insolvency Act 1986 (Amendment) (No. 3) Regulations 2002 provide that a company will also be ineligible for a moratorium if it:

·        is involved in a securitisation transaction involving finance of £10 million or more;

·        is a public/private project company where the financier has the right to step in and take over the project delivering services on behalf of a public body;

·        incurs a liability of £10 million or more under an agreement; or,

·        is a holding company of a large group (which for the purpose of these Regulations is a group which is not small or medium-sized for the purposes of the Companies Act 1985).

4.The associated secondary legislation comprises the following statutory instruments: -

The Insolvency Act 2000 (Commencement No.2) Order 2001 (S.I. 2001.No1751 (C.59))

The Insolvency Act 1986(Amendment) (No.3) Regulations 2002 (S.I. 2002/1990)

The Insolvency Act 2000 (Commencement No. 3 and Transitional Provisions) Order 2002 (S.I.2002 No.2711 (C.83))

The Insolvency (Amendment) (No.2) Rules 2002 (S.I.2002/2712)  

The Insolvency (Scotland) Amendment Rules 2002(S.I.2002/2709(S.10))

The Insolvency Practitioners (Amendment) Regulations 2002 (S.I.2002/2710)

The Insolvency Practitioners (Amendment) (No.2) Regulations 2002 (S.I.2002/2748)

The Insolvent Partnerships (Amendment) (No.2) Order 2002 (S.I.2002/2708)

These statutory instruments can be found on the HMSO web site at www.hmso.gov.uk .

5.The Insolvency (Amendment) (No.2) Rules 2002 and The Insolvency (Scotland) Amendment Rules 2002 provide the necessary detail needed to make the new voluntary arrangement provisions work effectively and efficiently in the respective jurisdictions. Whilst the purpose of this note is not to give an in depth view and analysis of the new rules, you may wish to note the following:

In CVA moratorium cases

• where a moratorium is in force, votes will  be calculated according to the amount of the creditor's debt as at the beginning of the moratorium.
• any resolution to pass, extend or further extend the moratorium, or to bring the moratorium to an end before the end of the period of any extension, must have a majority in excess of three-quarters in value of the creditors present in person or by proxy and voting (the requisite majority for members must be more than half in value). Fully secured creditors will be allowed to vote for the full amount of their debt on this issue. 

In both CVA moratorium and non-moratorium cases

• the meetings of the creditors and the company will no longer have to be held on the same day.
• the supervisor of a voluntary arrangement will now have to send notice to all creditors, members, the registrar of companies and the court that the voluntary arrangement has been fully implemented or terminated .
• a proposal for the voluntary arrangement  will have to state how it is proposed to deal with the claims of  "unknown" creditors.

In IVA cases

• if an interim order is in place and no bankruptcy order has been made, a creditor's vote will be  calculated according to the amount of the debt as at the date the interim order was made;
• if no interim order has been obtained and no bankruptcy order has been made, then  votes will be  calculated according to amount of the debt as at the date of the meeting; or
• in any case where a bankruptcy order has already been made, then  votes will be calculated according to the amount of  debt at the date of the bankruptcy order
• two copies of a report made under section 256 or 256A will now be required.
• a proposal for a voluntary arrangement will have to state how it is intended to deal with “unknown creditors.

5.The Insolvent Partnerships Order 1994 (the Order), which permits a partnership to enter into a voluntary arrangement with its creditors, has also been amended by The Insolvent Partnerships (Amendment) Regulations (No.2) Order 2002. As a consequence partnerships will be able to avail themselves of the new moratorium procedure available to small companies. Creditors will be able to petition for the winding up of a partnership in moratorium cases where no voluntary arrangement takes effect.

The technical improvements to the existing CVA procedure have also been applied to partnerships. Additionally, the Order has been amended to prohibit any right of forfeiture by peaceable re-entry in relation to premises forming part of the partnership property during the administration procedure. 

6. The Insolvency Practitioners (Amendment) Regulations 2002 provide that nominees will be required to include all appointments as nominee on their bordereau in future as a consequence of the changes made to section 388 of the Insolvency Act 1986. The amended Regulations also provide that in those cases where a nominee becomes a supervisor, no new “specific penalty” is required.  

7.Lewis –v- Commissioners of the Inland Revenue – Rules 4.218 and 6.224 of the Insolvency Rules 1986 have been amended by The Insolvency (Amendment) (No.2) Rules 2002 so that liquidators and trustees in bankruptcy will be able to recover properly incurred costs in the relevant order of priority out of the assets of the estate. 

8.Transitional provisions – The revised provisions relating to voluntary arrangements and nominees/supervisors and Rules 4.218 and 6.224 apply only to new cases and do not have retrospective effect.   

Annex A 

Section 1: CVA Moratorium where directors propose voluntary arrangement 

1.This Section introduces Schedule 1 to the Insolvency Act 2000, which makes the option of applying for a short moratorium available to an eligible company where its directors intend to put a proposal to the company and its creditors for a company voluntary arrangement. 

Schedule 1

2. Paragraphs 1, 2, 3 and 4: These paragraphs amend the Insolvency Act 1986 by the insertion of a new Section and Schedule (Section 1A and Schedule A1) to that Act so that the directors of eligible companies, if they so wish, can obtain a short moratorium for their company during which a proposal for a company voluntary arrangement can be put to its creditors. 

3.Paragraph 1 Schedule A1: Interpretation. This defines some of the terms which are used in Schedule A1. 

4.Paragraphs 2 to 4 Schedule A1: Eligible companies. These paragraphs set out which companies are eligible for a moratorium. 

5.Paragraph 5 Schedule A1. The Secretary of State may, by regulations, amend the eligibility criteria. 

6.Paragraph 6 Schedule A1: Nominee's statement. This paragraph places a duty upon directors intending to obtain a moratorium to provide information to the nominee. They must give him a document setting out the terms of the proposed company voluntary arrangement and another containing details of the company's assets, debts and other liabilities, together with any other information the nominee may request. 

If the nominee considers that the proposal has a reasonable prospect of being approved and implemented, that sufficient funding is available and that meetings of the company and the creditors should be held, he must provide a statement to the directors to that effect. In reaching his view, the nominee may rely on the information provided by the directors unless he has reason to believe it may be inaccurate. 

7.Paragraph 7 Schedule A1: Documents to be submitted to court. To obtain a moratorium the directors must file certain documents at court. The list of documents to be filed may be amended by regulations. 

8.Paragraph 8 Schedule A1: Duration of moratorium. This paragraph sets out the

duration of a moratorium. It provides that a moratorium comes into force when the documents required to be submitted to the court are filed. 

The maximum initial moratorium period is 28 days.  A meeting of the company and creditors held within the initial period may decide to extend the period of the moratorium by up to a further two months (paragraph 32 Schedule A1). The Secretary of State may by order increase or decrease either the 28 day or the two month period. 

The moratorium may be brought to an end by a decision of the meetings of creditors and the company to approve a company voluntary arrangement having effect under paragraph 36. Alternatively, it may be ended:

• by a decision of the court;

• by the withdrawal by the nominee of his consent to act;

• by a decision of the meetings of creditors and company;

• on the expiry of the initial moratorium period of 28 days if the nominee has failed to summon either of the first meetings of the company or creditors;

• if either of those meetings has not met when summoned to be held, unless the moratorium is extended under paragraph 32; or

• if there is no decision by the meetings to extend

9.Paragraph 9 Schedule A1: Notification of beginning of moratorium. This places a duty on the directors of the company to notify the nominee that a moratorium has come into force

10.Paragraphs 10 to 11 Schedule A1. When a moratorium comes into force, and when it ends, the nominee must advertise that fact and also notify the registrar of companies and the company. In the case of a moratorium coming into force, he must also notify any creditor who has petitioned for the winding up of the company and, where it ends, any creditor of whose claim he is aware.

11.Paragraph 12 Schedule A1: Effects on creditors, etc. This deals with the effects of a moratorium upon parties, other than the company, during the period that a moratorium is in force.

Save for an excepted petition to wind up a company (paragraph 12(5) Schedule A1) no insolvency proceedings can be commenced against the company. Except with the leave of the court, in each case, no steps may be taken to enforce any security over the company's property or repossess any goods in the company's possession under any hire-purchase agreement, nor can any other proceedings, execution or other legal process be commenced or continued or distraint be levied, nor can a landlord forfeit the lease of a company's premises by means of peaceable re-entry. No meeting of the company may be held or requisitioned without the consent of the nominee or the court.

Where a petition (other than an excepted petition) for the winding up of the company has been presented before the beginning of the moratorium, and no winding-up order has been made, proceedings on the petition are stayed during the moratorium. Section 127 of the Insolvency Act 1986 will not apply during the moratorium or in the 28 day period referred to in paragraph 37(5)(a) of Schedule A1. Where an excepted petition for the winding up of the company has been presented to the court before the beginning of a moratorium, it can continue unaffected by the coming into force of the moratorium.

12.Paragraph 13 Schedule A1. The moratorium, whilst in force, prevents a floating charge from crystallising, or restrictions being imposed on the disposal of any of the company's property.

13.Paragraph 14 Schedule A1: Security granted during moratorium. Security given over a company's assets during the moratorium will be unenforceable unless at the time it was granted there were reasonable grounds for believing it would benefit the company.

14.Paragraph 15 Schedule A1: Paragraphs 16 to 23 apply in relation to a company which is subject to a moratorium. The fact that a company enters into a transaction in contravention of paragraphs 16 to 22 does not make that transaction void or unenforceable against the company.

15.Paragraph 16 Schedule A1: Company invoices, etc. All invoices, orders and letters, on which the name of the company appears, must also state the name of the nominee and refer to the fact that a moratorium is in force. If this provision is breached, the company and any officer of the company who, without reasonable excuse, authorises or permits the breach, commits an offence.

16.Paragraph 17 Schedule A1: Obtaining credit during moratorium. During the moratorium a company may not obtain credit to the value of £250 or more without first telling the person who is giving the credit that a moratorium is in force. Obtaining credit includes obtaining goods under a hire-purchase agreement and the case where goods are agreed to be sold under a conditional sale agreement. It also includes the receipt of payment in advance for the supply of goods or services. If this provision is breached, the company and any officer of the company who knowingly and wilfully authorises or permits the breach commits an offence.

17.Paragraphs 18 and 19 Schedule A1: Disposals and payments. During the moratorium the company may only dispose of any of its property or make any payment of a debt which existed at the start of the moratorium if there are reasonable grounds for believing that the disposal or payment will benefit the company and it is approved by the moratorium committee, or, if there is no such committee, by the nominee. There is nothing to stop a company, during a moratorium, selling its property in the ordinary course of its business, e.g. a garage selling cars. If the company makes a disposal or payment contrary to these provisions, otherwise than in pursuance of an order of court, the company and any officer of the company who, without reasonable excuse, authorises or permits the contravention commits an offence.

18.Paragraphs 20 to 22 Schedule A1: Disposal of charged property, etc. These paragraphs permit the disposal, during the moratorium, by the company (by sale or otherwise) of charged property and any goods which are in the possession of the company under a hire-purchase agreement if the court or the holder of the security or owner concerned agrees. Provision is also made for how the property must be dealt with and how the sale proceeds are to be dealt with. If these provisions are breached, the company and any officer of the company who, without reasonable excuse, authorises or permits the breach commits an offence.

19.Paragraph 23 Schedule A1. When a moratorium is in force, a company commits an offence if it enters into a market contract, grants a market charge or system-charge gives a transfer order or provides any collateral security. Any officer of the company who, without reasonable excuse, authorises or permits the company to enter into such a transaction also commits an offence. However, the fact that a company enters into any of those transactions does not make the transaction void or have the effect of making any such transaction unenforceable by or against the company.

20.Paragraph 24 Schedule A1: Monitoring of company's activities. This paragraph imposes a duty on the nominee to monitor the company's affairs during the moratorium in order to form an opinion as to whether or not the proposed voluntary arrangement (or that arrangement with any modifications of which he has been notified) has a reasonable prospect of being approved and implemented and the company is likely to have sufficient funds to enable it to continue its business through the moratorium. The term "business" refers to that business which the company proposes to carry on during the moratorium. The nominee may seek further information from the directors for the purpose of forming his opinion.

21.Paragraph 25 Schedule A1: Withdrawal of consent to act. This paragraph provides that a nominee must withdraw his consent to act if:

·        he considers that the voluntary arrangement proposal (or, if he has received notice of modifications, the proposal as modified) no longer has a reasonable prospect of being approved or implemented; or

·        he considers that the company will not have sufficient funds to enable it to continue to carry on its business through the moratorium; or

·        he becomes aware that on the date of filing the company was not eligible for a moratorium; or

·        the directors do not provide him with necessary information which he requests.

The paragraph provides that the moratorium comes to an end if the nominee withdraws his consent to act. The paragraph further provides that a nominee may not withdraw his consent to act in other circumstances. Where the nominee does withdraw his consent, he must give notice of that to various parties and failure to do so without reasonable excuse is an offence.

22.Paragraph 26 Schedule A1: Challenge of nominee's actions, etc. The court, on the application of any creditor, director or member of the company or any other person affected by the moratorium who is dissatisfied by any decision or act of the nominee, may confirm, reverse or modify that decision or act and give directions to the nominee or make any order it sees fit, either during or after the moratorium.

23.Paragraph 27 Schedule A1 sets out the course of action creditors may take if there are reasonable grounds for believing that the company has suffered a loss as a consequence of any act, omission or decision of the nominee, but the company does not propose to take any action. If the court concludes that the act of the nominee was not reasonable, it may order the company to pursue any claim against the nominee or authorise a creditor to do so or make any other order it sees fit.

24.Paragraph 28 Schedule A1: Replacement of nominee by court. This paragraph provides that in certain circumstances (for example, if it is impracticable or inappropriate for the nominee to continue) the court may direct that the nominee be replaced by another person with the necessary qualification.

25.Paragraphs 29 and 30 Schedule A1: Summoning of meetings/conduct of meetings. These paragraphs provide for the summoning, conduct and reporting to the court of the outcome of such meetings of the creditors and the company as the nominee calls. He must call meetings of the creditors and of the company to be held within the period set out in paragraph 8(3).

26.Paragraph 31 Schedule A1: Approval of voluntary arrangement. This paragraph provides that the meetings summoned under paragraph 29 of Schedule A1 shall decide whether or not to approve the proposed voluntary arrangement (with or without modifications). But such modifications may not, without the concurrence of the creditors concerned, affect the right of a secured creditor to enforce his security or the rights of preferential creditors to be paid in priority to other debts.

27.Paragraphs 32 to 34 Schedule A1: Extension of Moratorium. These paragraphs permit the initial period of the moratorium to be extended for a maximum period of up to two months provided certain conditions are satisfied.

The Secretary of State may make an order increasing or reducing the period by which the moratorium period may be extended.

28.Paragraph 35 Schedule A1: Moratorium Committee. Where a moratorium is extended, this paragraph makes provision for a moratorium committee to be set up to exercise functions conferred on it by the meetings held under paragraph 29 of Schedule A1 where those meetings have approved an estimate of the expenses to be incurred in carrying out the committee's functions.

29.Paragraph 36 Schedule A1: Effectiveness of decisions. This paragraph determines when decisions under paragraphs 31, 32 or 35 of Schedule A1 are to take effect. It also provides that, in the case of a conflict, the decision of the creditors' meeting is to prevail, subject to the right of any member to apply to court for an order that the decision of the company meeting should prevail instead.

30.Paragraph 37 Schedule A1: Effect of approval of voluntary arrangement. This paragraph provides that a decision approving a company voluntary arrangement binds all creditors of the company owed money at the start of the moratorium, including unknown creditors (persons who were not served with notice of the meeting at which the company voluntary arrangement was approved but who would have been entitled to vote had they had notice of it). If unknown creditors come to light after the voluntary arrangement has been completed, they can claim the amount they would have received from the company. It also, subject to certain restrictions, requires the court to dismiss any petition (other than an excepted petition) for the winding up of the company.

31.Paragraph 38 Schedule A1: Challenge of decisions. This paragraph provides, for the decision approving a company voluntary arrangement to be challenged by way of application to the court on the ground that it unfairly prejudices the interests of a specific person or that there has been some material irregularity in the conduct of a meeting held under paragraph 29 of Schedule A1. Unknown creditors who come to light after the voluntary arrangement has been completed can apply to the court on grounds of unfair prejudice. On such an application the court may, for example, revoke or suspend the decision approving the voluntary arrangement or direct that new meetings be summoned to consider any revised proposal.

32.Paragraph 39 Schedule A1: Implementation of voluntary arrangements. This paragraph provides for the implementation of an agreed company voluntary arrangement, and for the person who is carrying out the functions of the nominee to become the supervisor of the voluntary arrangement. It also enables people who are dissatisfied with any action of the supervisor to apply to the court and sets out what the court can do in such circumstances. It also enables the supervisor to apply to court for directions or petition for the winding up of the company or an administration order and enables the court to fill any vacancy in the office of supervisor.

33.Paragraph 40 Schedule A1: Challenge of directors' actions. This paragraph provides that any creditor or member of the company can apply to the court if he considers that the company's affairs have been or are being managed in a way which is unfairly prejudicial to the interests of creditors or members or that an actual or proposed act or omission of the directors is or would be so prejudicial. The paragraph only applies in relation to acts or omissions of the directors during the moratorium. On such an application the court may, for example, make an order to regulate the management by the directors of the company's affairs or an order to bring the moratorium to an end.

When making an order under this paragraph the court is required to have regard to the need to safeguard the interests of persons who have dealt with the company in good faith and for value. In the event that the company subsequently enters administration or liquidation (on a petition presented before the moratorium) any such application under this paragraph is to be made instead by the administrator or liquidator (as the case may be).

34.Paragraph 41 Schedule A1: Offences. This paragraph provides that any person who was an officer of the company who did certain acts in the 12 months prior to the start of the moratorium is to be treated as having committed an offence, e.g. if the officer has fraudulently removed company property worth £500 or more, or destroys or falsifies the company's records in relation to its property in that period. Any person who is an officer of the company during the moratorium who does the same things also commits an offence. The paragraph provides defences which may be raised in relation to the offences.

35.Paragraph 42 Schedule A1. This paragraph provides that it is an offence for an officer of the company to seek to obtain a moratorium, or an extension of it, by making a false representation or fraudulently doing, or failing to do, anything.

36.Paragraph 43 Schedule A1: Void provisions in floating charge documents. This paragraph provides that any provision in a floating charge is invalid if it provides for the obtaining of, or any action to obtain a moratorium, to be an event causing the charge to crystallise or restrictions to be imposed on the disposal of property or a ground for the appointment of a receiver.

37.Paragraph 44 Schedule A1. This paragraph gives the Financial Services Authority the right to participate in the moratorium procedure if the company is or has been regulated by the Authority.

38.The remaining paragraphs 5 to 12 of Schedule to the Insolvency Act 2000 make consequential amendments to various parts of the Insolvency Act 1986. For example, the amendments to Section 233 will not permit suppliers of gas, water and electricity to require a nominee to pay outstanding debts for supply as a condition of supply during the moratorium. The amendment to Section 387 provides that the relevant date for determining preferential claims is the date on which the moratorium comes into force. A new Section 417A is added (order - making power to increase or reduce monetary sums specified in Schedule A1) to take account of the addition of the new company voluntary arrangement moratorium.

Annex B 

Section 2: Company voluntary arrangements

This Section introduces Schedule 2 to the  Insolvency Act 2000 which makes various amendments to the existing company voluntary arrangement procedure in Part I of the Insolvency Act 1986.

Schedule 2: Company voluntary arrangements 

Part I - Amendments of the Insolvency Act 1986 

This Schedule makes amendments to the provisions of the Insolvency Act 1986 relating to company voluntary arrangements where there is no moratorium.

The nominee must state in his report to the court whether in his opinion the proposed company voluntary arrangement has a reasonable prospect of being approved and implemented (paragraph 3).

Amendments are also made to the circumstances in which the court may replace a nominee (paragraph 3).

A decision by the creditors' meeting to approve a proposed voluntary arrangement is to prevail where this conflicts with the decision by the meeting of the company, subject to the right of a member to challenge this on an application to the court. Where such an application is made and the company is or has been regulated by the Financial Services Authority, the Authority is entitled to be heard on that application (paragraph 5).

The company voluntary arrangement will bind all of the company's creditors, including unknown creditors, who are entitled to claim from the company the amounts they would have received if they come to light after the voluntary arrangement has been completed. Such creditors may also make an application to the court on the ground that their interests are unfairly prejudiced by the voluntary arrangement that is approved (paragraphs 6 and 7).

It is an offence for an officer of a company to seek to obtain the approval of the members or creditors to a proposed voluntary arrangement by making a false representation or fraudulently doing, or failing to do, anything (paragraphs 8 and 12).

The nominee or supervisor is required to report suspected offences to the Secretary of State in England and Wales or to the Lord Advocate in Scotland. The Secretary of State is granted certain powers to investigate such suspected offences (paragraph 10).

There are also consequential amendments resulting from Section 4 (Qualification or authorisation of insolvency practitioners) and other minor amendments of a clarifying nature. 

Part II- Amendments of the Building Societies Act 1986

This deals with the interaction of the company voluntary arrangement procedure with the Building Societies Act 1986. Principally it prevents a building society from using the company voluntary arrangement moratorium procedure.

Annex C 

Section 3: Individual voluntary arrangements

This Section introduces Schedule 3 to the Insolvency Act 2000 which makes various amendments to the existing individual voluntary arrangement procedure in Part VIII of the Insolvency Act 1986. 

Schedule 3: Individual voluntary arrangements

This Schedule makes amendments to the provisions of the Insolvency Act 1986 relating to individual voluntary arrangements

Except with the leave of the court, a landlord or any other person to whom rent is payable may not effect peaceable re-entry to premises let to a debtor, and distress may not be levied, whilst an interim order is in force (paragraph 2 ). Similarly, such persons may not effect peaceable re-entry (without leave) whilst an application for an interim order is pending and the court may forbid the levying of distress in that period (paragraph 4).

The nominee must state in his report to the court whether he considers that the proposed individual voluntary arrangement has a reasonable prospect of being approved and implemented (paragraph 6).

Amendments are made to the circumstances in which the court may replace a nominee (paragraph 6).

An individual may put a proposal for an individual voluntary arrangement to his creditors without first having to obtain an interim order as is currently the case (paragraphs 7 and 8).

The individual voluntary arrangement will bind all of the individual's creditors, including unknown creditors, who are entitled to claim from the individual the amounts they would have received if they come to light after the voluntary arrangement has been completed. They may also make an application to the court on the ground that their interests are unfairly prejudiced by the voluntary arrangement that is approved (paragraphs 10 and 11).

It is an offence for an individual to seek to obtain the approval of an individual voluntary arrangement by making a false representation or fraudulently doing, or failing to do, anything (paragraphs 12 and 16).

The nominee or supervisor is required to report suspected offences to the Secretary of State (paragraph 12).

Amendments to section 347 of the Insolvency Act 1986 provide that sections 252(2)(b) and 254(1) will apply to all forms of distress (paragraph 14).

An amendment to Section 387 provides the relevant date for determining claims where no interim order is obtained is the date on which the voluntary arrangement takes effect (paragraph 15).

There are also consequential amendments resulting from Section 4 (qualification or authorisation of insolvency practitioners) and other minor amendments of a clarifying nature.

19.  Education (Student Loans) Act 1990 Teaching and Higher Education Act 1998

In article 7 of this chapter the Insolvency Service provided guidance about student loans which indicated that only loans made under the provisions of the 1998 Act were provable as a bankruptcy debt and released on discharge. Following consideration of provisions of the Enterprise Act 2002 further advice on the status of student loans in bankruptcy has been sought and the view of the Insolvency Service now is that all loans outstanding at the date of the bankruptcy order, regardless of whether they were loans made under the  provisions of the 1990 Act or the 1998 Act, are provable in bankruptcy and are therefore released on discharge. (This information represents a change from that previously issued.)

As such loans are bankruptcy debts, the Student Loans Company Limited of 100 Bothwell Street, Glasgow G2 7JD should be included in the list of creditors in the usual way.

It is understood that by far the majority of student bankruptcies occur after graduation or other completion of a course of higher education although a very small number of bankruptcy orders are made against existing students. For students who have a bankruptcy order made against them during the course of their studies, all loan payments made after the date of the bankruptcy order will be post-bankruptcy debts and will neither be provable nor released on discharge. The Student Loans Company Limited will be able to recover them in the usual way.

As before, no part of any loan made after the date of bankruptcy under arrangements entered into before or after the bankruptcy may be claimed by the trustee in bankruptcy as a vesting asset, as after-acquired property or as part of an income payments order.

The position of student loans in an Individual Voluntary Arrangement is not dealt with specifically in either Act but it is considered that such loans can be bound by such an arrangement.

20.  Enterprise Act 2002 – Insolvency Provisions

The Enterprise Act 2002 received Royal Assent on 07 November.  The insolvency sections of the Act fall into four main areas: corporate insolvency; the abolition of Crown preference; individual insolvency (bankruptcy and IVAs) and the provisions relating to the financial regime of The Insolvency Service.

Work is underway in preparing the rules and other secondary legislation necessary to implement the Act’s provisions.  It is expected that the Act's provisions, rules and other secondary legislation on corporate insolvency and the abolition of Crown preference will be commenced early in the 2003 financial year, so as to allow time for those affected to prepare for the changes.  The individual insolvency provisions and secondary legislation and those reforming the Insolvency Service's financial regime are expected to come into force early in the 2004 financial year once the necessary staff training and infrastructure have been put in place.

The provisions

The corporate insolvency provisions are aimed at facilitating the rescue of viable companies, and if that is not practicable, or would not provide the best outcome for creditors, achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up.  The Act seeks to achieve this through restricting the use of administrative receivership to shift the balance in favour of administration, which is a collective procedure and takes account of the interests of all creditors.  The Act introduces a streamlined system of administration by providing out-of-court routes into administration for floating charge holders, companies and their directors and introducing an overall time-limit for the process, imposing a new duty on the administrator to perform his or her functions as quickly and efficiently as reasonably possible, as well as reducing time limits generally.

The abolition of Crown preference will remove the Government’s right to claim unpaid taxes ahead of other creditors and will bring real benefits to unsecured creditors, including many small firms.

The individual insolvency provisions will provide a fresh start to those who have failed by reducing the discharge period to a maximum of 12 months for most bankrupts.  This is set against the need to protect the public against the small minority of bankrupts who abuse their creditors.  This counterbalance is achieved through the new Bankruptcy Restrictions Order regime.  The provisions will also ensure that those who can pay their creditors, do so. Income payments orders (and new income payments agreements) will run for three years, notwithstanding discharge.  The Act also limits the period within which a trustee must deal with a bankrupt’s interest in the sole or principal residence of the bankrupt or the bankrupt’s spouse (or former spouse) to three years in most cases.

Modernisation of the financial regime of The Insolvency Service will bring increased transparency and simplicity to the fee structure while reforms to the Insolvency Services Account will mean that creditors, including many small firms, receive the maximum possible investment return.

Implementation of the Enterprise Act will require secondary legislation, including changes to the Insolvency Rules.  Work on this secondary legislation is under way.  The Insolvency Service will be listening to the views of key stakeholders in the procedure over the next few months.  Prior to being laid in Parliament, the Lord Chancellor must consult the Insolvency Rules Committee on any changes to the Rules.

Further information about the provisions, are available on the Insolvency Reform website – www.insolvency.gov.uk/reform.htm - and a link to the Act will be added when it is published.  Alternatively the Section Heads with responsibility for the Act are:

General enquiries may be directed to policy.unit@insolvency.gov.uk

Telephone: 0207 291 6740

21.   The Insurers (Reorganisation and Winding Up) Regulations 2003 (2003 No. 1102)

The Insurers (Reorganisation and Winding Up) Regulations 2003 (2003 No. 1102) came into force on 20th April 2003. The Regulations implement EU directive 2001/17/EC for all UK insurers except Lloyds. The directive requires reorganisation measures or winding up proceedings affecting an insurer to be recognised in all member states without further formality. The Regulations provide that, as from 20^th April 2003, no winding up proceedings, administration orders or voluntary arrangements in respect of EEA insurers (insurers that have received authorisation from a state within the European Economic Area, other than the UK) can be undertaken in the UK, except in the circumstances permitted by the Regulations, and that EEA winding up and reorganisation measures are to have effect in the UK as if they were part of the general law of insolvency in the UK.

Provision is also made for the exercise by EEA liquidators of their functions in the UK. The Regulations modify general insolvency law, as it has effect in relation to UK insurers, in order to implement the provisions of the directive relating to notification of regulators and creditors. The Regulations require notification of reorganisation measures and winding up proceedings (as well as certain other matters) to be given to the FSA. The FSA then has a duty to notify the EEA regulators in every EEA state about the commencement of such proceedings. The Regulations create requirements for the publication of decisions to commence reorganisation measures or winding up proceedings. The Regulations also create requirements for notifying creditors in other EEA states of certain reorganisation measures and winding up proceedings. Of particular note, the Regulations provide for the special order of priority for insurance debts created by the directive to apply to UK insurers and for the carrying through of the consequences of this into the general law of insolvency. Exactly how this new regime will apply will depend on a variety of factors - for example, whether or not the insurer’s business has been transferred and the level of available assets - and so consideration of its application will need to be undertaken on a case-by-case basis.

38. Pensions Act 2004 

1.1  The Pensions Act 2004 (“the Act”) received Royal Assent on 18 November 2004. 

1.2 The Act brings into existence a new Pensions Regulator and the Pension Protection Fund (funded by a levy on eligible defined benefit and hybrid occupational pension schemes). Both organisations will become operational on 6 April 2005.  The Board of the Pension Protection Fund will become involved at an early stage in most insolvency proceedings, in place of the trustees, where the employer has an occupational pension scheme.  The Pension Protection Fund requires information from the insolvency practitioner that an insolvency procedure has begun as this will trigger an assessment period, during which the Pension Protection Fund will establish whether or not it is to assume responsibility for the scheme. 

1.3 The insolvency practitioner is also required to tell the Pension Protection Fund when he knows either that a scheme has been rescued or that it is not possible for the scheme to be rescued.  If the scheme is rescued, the Pension Protection Fund withdraws.  If it is not possible for the scheme to be rescued, and the scheme is insufficiently funded to pay benefits at the Pension Protection Fund level of benefits, the Pension Protection Fund will take over the assets of the scheme and pay compensation to pensioners or members.  During the assessment period the Pension Protection Fund takes over the role of creditor of the employer from the trustees or managers of the scheme. However as the trustees will remain responsible for the day to day administration of the scheme please direct any employee enquires to the trustees rather than to the Pension Protection Fund. 

1.4 Details of the reporting requirements and an indication of where pro-forma forms may be obtained are given in paragraph 2. 

1.5 There are anti-avoidance provisions to enable the Regulator to protect the Pension Protection Fund against abuse.  In so far as they affect insolvency practitioners , they are set out at paragraph 4. 

1.6 Paragraph 5 gives details of changes to the provisions relating to the appointment of independent trustees.  

1.7 The Government also made provision in the Act to set up the Financial Assistance Scheme (FAS) which will provide assistance to some members of qualifying occupational pension schemes where the scheme commenced winding up before 6 April 2005.  Paragraph 7 gives brief details of the FAS and the dividing lines between the FAS and the Pension Protection Fund.

2. Notices to be issued by INSOLVENCY PRACTIONERS. 

2.1 Duty to notify insolvency events in respect of employers  

2.2  Section 120 of the Act imposes a duty on an insolvency practitioner to give notice to the Board of the Pension Protection Fund, the Pensions Regulator and the trustees or managers of the scheme where he has been appointed in relation to an estate, there has been an “insolvency event” as defined by section 121 of the Act (and regulations under section 121(5)) and the employer has an occupational pension scheme. 

2.3  Notice has to be given within 14 days of the “insolvency event” or the insolvency practitioner becoming aware of the existence of the scheme, whichever is later.

2.4  Section 121 of the Act and regulations under section 121(5) set out what constitutes an “insolvency event” and these are listed in Annex 1 (in relation to an individual - page 17.81), Annex 2 (in relation to a company – page 17.82) and Annex 3 (in relation to a partnership – page 17.83).  

2.5  The Act deals with employers whose insolvency regimes are contained within insolvency legislation and not with bodies which have their own insolvency regimes (for example building societies and limited liability partnerships).  However, regulations under section 121(5) of the Act provide a list of additional insolvency events designed to provide for building societies, limited liability partnerships and others, these can be seen at Annex 4 – page 17.84. 

2.6  In addition to this, the Act gives powers for the Pension Protection Fund to consider applications by the trustees of a relevant scheme for the Pension Protection Fund to assume responsibility for eligible occupational pension schemes of public bodies and unincorporated charities in the circumstances where the employer is unlikely to continue as a going concern.   

2.7  The notice to inform the Pension Protection Fund that an insolvency event has occurred and that there is an occupational pension scheme in relation to the insolvent employer must adhere to legislation*. Although no statutory form of notice has been prescribed, a pro-forma notice will be available to download from the Pension Protection Fund website from 6 April 2005. The legal requirements will be drawn from regulation 4(2) of the Pension Protection Fund (Entry Rules) Regulations 2005 and an extract of the relevant provisions is shown at Annex 5 – page 17.85. 

2.8  Duty to notify status of the scheme 

2.9  If the pension scheme is rescued, whether as a consequence of the rescue of the employer or another person assuming responsibility for the scheme, the Pension Protection Fund will withdraw.   Once the insolvency practitioner is in a position to say either that the scheme has been rescued or that, in his opinion, it will not be possible for the scheme to be rescued, he should inform the Board of the Pension Protection Fund, the Regulator and the trustees or managers of the scheme as soon as reasonably practicable. These notices must comply with legislation*. 

2.10  Notice that the outcome for the scheme is not known – (Section 122(3) and (4))

2.11  Where the insolvency proceedings are stayed or come to an end, or a prescribed event occurs, and the IP has not been able to confirm before his appointment came to an end whether a scheme rescue had occurred, or was not possible, he should give notice to that effect. This notice must comply with legislation*. 

2.12    Annex 7- page 17.87  lists the circumstances in which this form is to be used. 

2.13 The information to be included in the notification of the status of the scheme or that the outcome for the scheme is not known will be drawn from regulation 9 of the Pension Protection Fund (Entry Rules) Regulations 2005 and an extract of the relevant provisions is shown at Annex 6 – page 17.86.  A pro-forma notice is available to download from the Pension Protection Fund website.

2.13 If you are unable to access the Pension Protection Fund website, these notices may be sent out to you if you contact the Pension Protection Fund (Contact details available at Annex 8 – page 17.89).  

3. APPROVAL OF NOTICES AND REVIEWS 

3.1 Where the Pension Protection Fund receives a notice from the Insolvency Practitioner regarding the status of the scheme the Board of the Pension Protection Fund must determine whether to approve the notice. They must approve the notice if they are satisfied that the Insolvency Practitioner was required to issue the notice and that the notice complies with the legal requirements to include specific information. Where the Board has determined whether or not to approve the notice they must issue a determination notice and send a copy of this to the Insolvency Practitioner, trustees and managers of the scheme and the Regulator. 

3.2 The determination notice by the Board is a reviewable matter, this means that: 

• if the Board fails to issue a determination notice within 14 days then on the 15^th day the insolvency practitioner or trustees may request a review; or

• if the insolvency practitioner or trustees are unhappy with the Board’s decision in the determination notice the insolvency practitioner  or trustees may request a review within 28 days of receipt of the determination notice.

3.3. Once any time limits for review have been exhausted and any reviews have been resolved the Board will issue a binding notice confirming the status of the scheme. 

4. ANTI-AVOIDANCE PROVISIONS 

4.1. Section 58 of the Act enables the Regulator to apply for an order under section 423 of the Insolvency Act 1986 (transactions defrauding creditors) if either: 

• The Board of the Pension Protection Fund has obtained an actuarial valuation of the fund, which outlines both the assets and the protected liabilities of the scheme (the cost of benefits for members to the same level which would be paid by the Board of the Pension Protection Fund, non member liabilities of the scheme and the estimated cost of wind-up) and the value of the assets are not sufficient to meet these liabilities at the time of the qualifying insolvency event; o

• The trustees or managers of the scheme have obtained an actuarial valuation which indicates that the funding objective (the statutory funding objective) is not being met.

4.2. If the employer is an individual who has been declared bankrupt, a corporate body which is being wound-up or is in administration, or a partnership which is being wound-up or is in administration, then the Regulator must get the court’s permission to make an application under section 423 of the Insolvency Act 1986. 

4.3. The Regulator may issue contribution notices where certain acts or deliberate failures to act have occurred (sections 38 to 42 of the Act (contribution notices where avoidance of employer debt)).    Insolvency practitioners are excluded from the scope of these provisions provided that the Regulator is satisfied that they are acting in accordance with their functions. 

5. INDEPENDENT TRUSTEES (Section 36) 

5.1. The Act amends the provisions in the Pensions Act 1995 which place a duty on official receivers and insolvency practitioners to appoint independent trustees where appropriate.  This duty has been removed and the Regulator now has a discretionary power to appoint independent trustees. Official Receivers and insolvency practitioners are now required to give notice to the Regulator of the beginning and the end of the period during which the Official Receiver or insolvency practitioner is acting in relation to the employer. 

6. BOARD OF THE PENSION PROTECTION FUND ACTING AS CREDITOR (Section 137) 

6.1 From the beginning of the assessment period, the rights of the trustees or managers of the scheme in relation to any debt due to them by the employer, whether contingent or not, are exercisable by the Board, to the exclusion of the trustees or managers.  This continues unless the Pension Protection Fund withdraws from the scheme. 

6.2 Members of schemes should, however, still be directed to the trustees with any queries concerning the scheme, rather than to the Pension Protection Fund.  It will be for the trustees to liase with the Pension Protection Fund concerning the scheme. 

7. FINANCIAL ASSISTANCE SCHEME (FAS) 

7.1. Eligible schemes, whose sponsoring employer has entered insolvency proceedings before 6 April 2005 may still be able to receive Pension Protection Fund compensation. Schemes will have to satisfy other Pension Protection Fund eligibility criteria—in particular, the sponsoring employer will need to have an insolvency event after the introduction of the Pension Protection Fund and the pension scheme must not have commenced wind up prior to that date 

7.2.  The FAS will provide assistance to some members of some underfunded schemes have commenced wind up prior to 6 April 2005. Eligible schemes will have to satisfy other FAS qualifying conditions, including conditions relating to employer insolvency. The FAS definition of insolvency will be similar to the definition of insolvency used by the Pension Protection Fund but with the additional inclusion of Members’ Voluntary Liquidations and schemes will qualify where employer insolvency has occurred some time after, as well as before, wind-up. A final cut-off date by which employer insolvency must have occurred for schemes to remain eligible for the FAS has not yet been announced. 

7.3.  Further details of eligibility criteria will be contained in draft Regulations which will be published in late Spring.  

General enquiries may be directed to policy.unit@insolvency.gov.uk

Telephone: 0207 291 6740 

Annex 1 – “Insolvency events” in relation to an individual

See section 121(2) of the Pensions Act 2004 

An insolvency event occurs in relation to an individual where –

(a) he is adjudged bankrupt or sequestration of his estate has been awarded:

(b) the nominee submits a report to the court pursuant to section 256(1) or 256A(3) of the Insolvency Act 1986 stating his opinion that a meeting of the creditors should be called to consider the proposals;

(c) a deed of arrangement made by or in respect of the affairs of the individual is registered in accordance with the Deeds of Arrangement Act 1914;

(d) he executes a trust deed for his creditors or enters into a composition or contract;

(e) he has died and –

(i) an insolvency administration order is made, or

(ii) a judicial factor appointed under section 11A of the Judicial Factors (Scotland) Act 1889 is required by that section to divide the individual’s estate amongst his creditors.

Annex 2 – “Insolvency events” in relation to a company

See section 121(3) of the Pensions Act 2004

An insolvency event occurs in relation to a company where –

(a) the nominee submits a report to the court pursuant to section 2 of the Insolvency Act 1986 stating his opinion that meetings of the company and its creditors should be summoned to consider the proposal;

(b) the directors of the company file (or in Scotland lodge) with the court documents and statements which begin a moratorium where the directors propose a voluntary arrangement;

(c) an administrative receiver is appointed in relation to the company;

(d) the company enters administration;

(e) a resolution is passed for creditors’ voluntary liquidation;

(f) a creditors’ meeting is held which converts a members’ voluntary liquidation into a creditors’ voluntary liquidation;

(g) a winding up order is made.

Annex 3 – “Insolvency events” in relation to a partnership

See section 121(4) of the Pensions Act 2004

An insolvency event occurs in relation to a partnership where –

(a)  an order for the winding up of the partnership is made;

(b) sequestration is awarded on the estate of the partnership under section 12 of the Bankruptcy (Scotland) Act 1985 or the partnership grants a trust deed for its creditors;

(c) the nominee submits a report pursuant to section 2 of the Insolvency Act 1986 stating his opinion that meetings of the partnership and its creditors should be summoned to consider the proposals;

(d) the members of the partnership file with the court documents and statements which begin a moratorium where the members propose a voluntary arrangement;

(e) an administration order is made in relation to the partnership.

Note (e) will be amended by secondary legislation when the Insolvent Partnerships Order 1994 is amended to apply to partnerships the administration regime introduced by the Enterprise Act 2002).

Annex 4 - Additional Insolvency Events

See Regulation 5 of the Pension Protection Fund (Entry Rules) Regulations 2005)

An insolvency event occurs -

(a) in relation to a company, where an administration order is made by the court in respect of the company by virtue of any enactment which applies Part 2 of the Insolvency Act 1986 Act (administration orders) (with or without modification);

(b) in relation to a relevant body, where -

(i) any of the events referred to in section 121(3) of the Act (see Annex 2) occurs in relation to that body by virtue of the application (with or without modification) of any provision of the Insolvency Act 1986 Act by or under any other enactment; or

(ii) an administration order is made by the court in respect of the relevant body by virtue of any enactment which applies Part 2 of the Insolvency Act 1986 Act (with or without modification);

(c) in relation to a building society, where there is dissolution by consent of the members under section 87 of the Building Societies Act 1986;

(d) in relation to a friendly society, where there is dissolution by consent of the members under section 20 of the Friendly Societies Act 1992; and

(e) in relation to an industrial and provident society, where there is dissolution by consent of the members under section 58 of the Industrial and Provident Societies Act 1965

 “administration order” means an order whereby the management of the company or relevant body, as the case may be, is placed in the hands of a person appointed by the court;

“relevant body” means -

• a credit union;

• a limited liability partnership;

• a building society;

• a person who has permission to act under Part IV of the FSMA;

• the society of Lloyd’s and Lloyd’s members;

• a friendly society; or

• a society which is registered as an industrial and provident society.

(NB. A reference to Part 2 of the Insolvency Act 1986 Act, insofar as it relates to a company or society listed in section 249(1) of the Enterprise Act 2002 (special administration arrangements), has effect as if it referred to Part 2 of the 1986 Act as it had effect immediately before 15^th September 2003.)

Annex 5 - information to be supplied by the insolvency practitioner on the occurrence of an “insolvency event”

See regulation 4(2) of the Pension Protection Fund (Entry Rules) Regulations 2005.

A notice issued by an insolvency practitioner under section 120(2) of the Act shall be in writing and shall contain the following information—

(a) the name or type of the notice issued;

(b) the date on which the notice is issued;

(c) the name, address and pension scheme registration number of the scheme in respect of which the notice is issued;

(d) the name of the employer in relation to the scheme in respect of which the notice is issued;

(e) the nature of the insolvency event which has occurred and the date of the occurrence of that event;

(f) the name of the insolvency practitioner acting in relation to the employer in relation to the scheme;

(g) the date on which the insolvency practitioner was appointed to act or consented to act in relation to the employer in relation to the scheme or, in any case where the insolvency practitioner is the official receiver, the date on which the official receiver began to act in relation to that employer;

(h) the address for communications at which the insolvency practitioner may be contacted by the Board in connection with the issue of the notice; and

(i) whether the notice issued contains any commercially sensitive information.

Annex 6 - Information to be included in notification of the status of the scheme

See Regulation 9(3) of the Pension Protection Fund (Entry Rules) Regulations 2005.

A notice issued by an insolvency practitioner under section 122(2)(a) or (b) of the Act or by a former insolvency practitioner under section 122(4) of the Act shall be in writing and shall contain the following information

(a) the name or type of notice issued;

(b) the date on which the notice is issued;

(c) the name, address and pension scheme registration number of the scheme in respect of which the notice is issued;

(d) the name of the employer in relation to the scheme in respect of which the    notice is issued;

(e) the name of the insolvency practitioner or former insolvency practitioner and the address at which that insolvency practitioner may be contacted by the Board in connection with the issue of the notice;

(f) a statement by the insolvency practitioner or former insolvency practitioner that, as the case may be, a scheme rescue has occurred or a scheme rescue is not possible or that he has been unable to confirm that a scheme rescue has occurred or that a scheme rescue is not possible;

(g) if a scheme rescue has occurred, the date or the approximate date of the scheme rescue and, if there is a new employer in relation to the scheme, the name and address of that employer in relation to the scheme;

(h) if a scheme rescue is not possible, a statement from the insolvency practitioner or former insolvency practitioner as to why, in his opinion, this is not possible;

(i) if section 122(4) of the Act applies and the former insolvency practitioner has not been able to confirm in relation to the scheme that a scheme rescue is not possible, a statement from that insolvency practitioner as to why, in his opinion, this is the case;

(j) a statement that the notice issued will not become binding until it has been approved by the Board; and

(k) whether, in the opinion of the insolvency practitioner or former insolvency practitioner, the notice issued contains any commercially sensitive information.

Annex 7- Events triggering obligation to file a “scheme rescue uncertain” notice under section 122(3)

            Companies

1. Where the procedure for a voluntary arrangement has commenced but for whatever reason no voluntary arrangement has effect.

2. Where a company has entered a moratorium with a view to the proposal of a voluntary arrangement and the moratorium has terminated without a voluntary arrangement taking effect.

3.Where the company enters administration, the appointment of an administrator in respect of the company ceases to have effect, except where:

(a) the company moves from administration into winding up pursuant to paragraph 83 (moving from administration to creditor’s voluntary liquidation) of Schedule B1 to the 1986 Act or pursuant to an order of the court under Rule 2.132 of the Insolvency Rules or

(b) a winding up order is made by the court immediately upon the appointment of the administrator ceasing to have effect.

4. Where an administrative receiver vacates office under section 45 of the Act.

5.Where the winding up proceedings are stayed or the winding up order is rescinded or discharged, except where the court has made an administration order.

            Individuals

1.Where the procedure for a voluntary arrangement has commenced but for whatever reason no voluntary arrangement has effect.

2.Where an individual has been adjudged bankrupt, the bankruptcy order is annulled or rescinded.

3.Where an insolvency administration order is annulled or rescinded.

            Partnerships

References are to provisions of the Rules and of the Act as applied by an order under section 420 of the Act.

Where the procedure for a voluntary arrangement has commenced under section 2 of the 1986 Act but for whatever reason no voluntary arrangement has effect or a moratorium with a view to a voluntary arrangement has terminated without the voluntary arrangement taking effect, whichever is applicable.

1. Where an administration order has been made in relation to the partnership under Part 2 of the Act, the order is discharged, except where:

(a) a winding up order is made by the court immediately upon the discharge of the administration order or

(b) the discharge is pursuant to an order of the court for the administration to be converted into winding up under rule 2.61(1) of the Insolvency Rules 1986 without the amendments made by the Insolvency (Amendment) Rules 2003.

(NB. These events will be amended when the IPO is amended to apply to partnerships the administration regime introduced by the Enterprise Act 2002.) 

2. Where an order for the winding up of the partnership has been made by the court, the winding up proceedings are stayed or the winding up order is rescinded or discharged.

Other situations triggering a “scheme rescue uncertain” notice

            Deeds of arrangement

Where a deed of arrangement made by or in respect of the individual has been registered under the Deeds of Arrangement Act 1914, but the deed is void in accordance with the provisions of section 3(1) of that Act.

For full details please see regulation 6 of the Pension Protection Fund (Entry Rules) Regulations 2005,

Annex 8

Contact Details 

Pension Protection Fund

Knollys House

17 Addiscombe Road

Croydon

Surrey

CR0 6SR

Website: www.pensionprotectionfund.org.uk

Email: information@ppf.gsi.gov.uk

The Pensions Regulator

Napier House

Trafalgar Place

Brighton

BN1 4DW

Customer support:

Phone: 0870 6063636

9am to 5pm, Monday to Friday

Fax: 0870 2411144

Email: customersupport@thepensionsregulator.gov.uk 

39. EC Regulation No. 1348/2000 on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters 

This article seeks to draw insolvency practitioners’ attention to the provisions of the above EC Regulation regarding the service of judicial and extrajudicial documents outside the United Kingdom.  The Regulation aims to expedite the transmission of these documents between Member States in civil or commercial matters (including insolvency proceedings).  It came into force on 31 May 2001 and is applicable to all Member States with the exception of Denmark.

The Regulation provides for different ways of transmitting and serving the documents: transmission through transmitting and receiving agencies, transmission by consular or diplomatic channels, service by diplomatic or consular agents, service by post and direct service.  Transmitting agencies are competent for the transmission of judicial or extrajudicial documents to be served in another Member State.  Receiving agencies are competent for the receipt of these documents from another Member State. 

Insolvency practitioners wishing to serve judicial or extrajudicial documents outside the United Kingdom should therefore consider using the provisions contained in the Regulation where proof of service may be required. 

To serve such a document outside the United Kingdom, the appropriate transmitting (and receiving agency) for England & Wales is: 

The Senior Master

Foreign Process Department (Room E10)

Royal Courts of Justice

Strand

London WC2A 2LL

Tel. 020 7947 6691

Fax. 020 7947 6237 

The relevant form for requesting service outside the United Kingdom in the High Court is Form PF 7, and in the County Court is Form N 224.  The forms should be completed and sent to the transmitting agency with the documents for service, if appropriate, in duplicate.  Both forms are available on the Her Majesty's Court Service website at: 

http://www.hmcourts-service.gov.uk/HMCSCourtFinder/FormFinder.do 

In Scotland the transmitting and receiving agencies are the Messengers-at-Arms and accredited solicitors.  A list of these is contained in the Manual of Receiving Agencies, which may be accessed through the link at the end of this article. 

Further information regarding the operation of the Regulation in Scotland should be addressed to the designated central body responsible for supplying information: 

Scottish Executive

Justice Department

Civil and International Division

2^nd Floor West, St Andrews House

Regent Road

Edinburgh EH1 3DG

Tel. 0131 244 4826

Fax. 0131 244 4848 

The transmitting agency is responsible for sending documents to the appropriate receiving agency.  The receiving agency shall itself serve the documents or have them served, either in accordance with the law of the Member State addressed or by a particular form requested by the transmitting agency, unless such a method is incompatible with the law of that Member State.  A certificate of service, or a notice of return in the standard form, will be addressed to the transmitting agency for forwarding to the applicant.   

The costs of service are borne by the applicant, and vary according to the service procedure adopted in the Member State addressed.  Further details are available from the appropriate transmitting agency. 

Nothing in the Regulation prevents service by post to persons residing in another Member State. Member States may specify the conditions under which they will accept service of judicial documents by post.  In addition, each Member State has its own “glossary” of what are deemed to be judicial and extrajudicial documents.  Consequently, the service of such documents by post according to the terms of the Regulation will not require a court order pursuant to Rule 12.12 of the Insolvency Rules 1986.  However, other documents not considered to be judicial or extrajudicial  for the purposes of the Regulation will still require a court order under that Rule. 

The provisions of Rule 12.10 of the Rules regarding service by post will be superseded by any conditions imposed by Member States under the Regulation regarding the acceptance of judicial documents by post. 

Judicial and extrajudicial documents are not specifically defined in the Regulation.  However, each Member State maintains a glossary of documents that are considered to be judicial or extrajudicial documents for the purposes of the Regulation.  The relevant glossary of the Member State in which it is intended to effect service can be accessed through the following link: 

http://europa.eu.int/comm/justice_home/judicialatlascivil/html/docservdocs_en.htm#Manual 

Further details relating to the general operation of the Regulation and copies of the legislation can be accessed at the website below, which also contains details of transmitting and receiving agencies in all other Member States: 

http://europa.eu.int/comm/justice_home/judicialatlascivil/html/docservinformation_en.htm

General enquiries may be directed to policy.unit@insolvency.gov.uk

Telephone: 0207 291 6740

40. Community Interest Companies 

The Companies (Audit, Investigations and Community Enterprise) Act 2004 and the Community Interest Company Regulations 2005 introduce a new form of company, the Community Interest Company (CIC), which can be formed from 1 July 2005. CICs are designed for social enterprises that want to use their profits and assets for the public good rather than for private profit and they will be subject to supervision by the Regulator of Community Interest Companies (based at Companies House, Cardiff). 

Subject to the specific requirements of the 2004 Act and Regulations, the whole of existing company law and practice is applicable to CICs and a CIC may be subject to all the usual insolvency procedures with some slight modifications. In particular, CICs will be subject to an asset-lock and Insolvency Practitioners should be aware that there are restrictions on the distribution of a CIC’s assets on winding up.

General enquiries may be directed to policy.unit@insolvency.gov.uk

Telephone: 0207 291 6740

41. Courts Act 2003 – Periodical Payments For Damages For Personal Injury 

We wish to draw insolvency practitioners’ attention to provisions of the Courts Act 2003 (“the 2003 Act”) in so far as they relate to periodical payments for damages for personal injury (“periodical payments”). 

These provisions came into force on 1 April 2005. 

The Government has introduced provisions to enable payments in relation to future loss and care costs arising from claims for personal injury to be made periodically rather than by lump sum payment, in appropriate cases.  Section 101 of the 2003 Act seeks to ensure that payments for medical and care costs are protected but does not otherwise give those in receipt of periodical payments preferential treatment over bankrupts who are not in receipt of personal injury damages. 

Under section 283 of the Insolvency Act 1986, any money in the hands of the bankrupt at the date of the bankruptcy order will vest in the trustee for the benefit of the creditors.  Periodical payments which have already been received by the bankrupt prior to the date of the order are not exempt from this provision and will therefore form part of the bankrupt’s estate.  Other assets bought with periodical payments will also continue to vest in the trustee. 

Under section 101(4) of the 2003 Act, the right to receive periodical payments and any annuity providing those payments will not form part of the bankrupt’s estate.  This means that the bankrupt will continue to receive periodical payments during, and after, the bankruptcy. 

Since periodical payments are treated as income for the purposes of insolvency law, they can be subject to an income payments order or agreement.    However, as a consequence of section 101(4)(c) of the 2003 Act, an income payments order or agreement cannot be made in respect of periodical payments for care and medical costs.  Payments in respect of loss of earnings are not exempt and therefore remain susceptible to an income payments order or agreement. 

To facilitate the relationship between periodical payments in respect of claims for personal injury and insolvency and social security law, Civil Procedure Rule (CPR) 41.8, which is set out on the following page, requires orders for periodical payments to identify the annual amount awarded for future loss of earnings and other income and also the amount awarded for future care and medical costs and other recurring or capital costs. 

Civil Procedure Rule 41.8 

41.8.-(1) Where the court awards damages in the form of periodical

payments, the order must specify - 

(a)       the annual amount awarded, how each payment is to be made during the year and at what intervals; 

(b)       the amount awarded for future -

            (i)         loss of earnings and other income; and

(ii)               care and medical costs and other recurring or capital costs  

(c)   that the claimant's annual future pecuniary losses, as assessed by the court, are to be paid for the duration of the claimant's life, or such other period as the court orders; and 

(d) that the amount of the payments shall vary annually by reference to the retail prices index, unless the court orders otherwise under section 2(9) of [the Damages Act 1996]. 

General enquiries may be directed to policy.unit@insolvency.gov.uk

Telephone: 0207 291 6740

42. Civil Partnership Act 2004   

The Civil Partnership Act 2004 (“CPA”) will come into force on 5 December 2005 and will allow civil partnerships to be formed in the UK from 21 December 2005. 

The Act will give same-sex couples the ability to gain legal recognition for their relationship and creates a new legal status, i.e. “civil partner”. Same-sex couples who form a civil partnership will gain parity of treatment in many areas with those of opposite-sex couples who enter into a marriage. For example, provisions in the CPA include equitable treatment for the purposes of employment, pension benefits and life assurance, recognition under intestacy rules and a duty to provide reasonable maintenance for a civil partner and any children of the family.  

In order to achieve this equality a wide range of legislation, including that covering insolvency, is being amended to include references to a civil partner/former civil partner. The basic principle is that a civil partner/former civil partner will have the same rights and responsibilities as a spouse/former spouse.    

In general terms, the civil partner of a bankrupt will have the same rights and obligations as a bankrupt’s spouse. In addition, the anti-abuse and other avoidance provisions of the Insolvency Act 1986 which deal with transactions involving close family and other associated persons will cover a civil partner in the same way as they would if the civil partner were a spouse. 

Further information on the CPA is available from the DTI’s Women and Equality Unit – www.womenandequalityunit.gov.uk.

General enquiries may be directed to policy.unit@insolvency.gov.uk

Telephone: 0207 291 6740

43. Pensions Act 2004; new responsibilities for insolvency practitioners 

Further to the information contained in item 38 of this chapter (Issue 23 – Pensions Act 2004) The Insolvency Service has been asked to provide further information concerning the appointment of the independent trustee to which paragraph 5 of that article refers. 

Where an independent trustee is to be appointed in an insolvency, such an appointment must now be made by the Pensions Regulator, and not by insolvency practitioners. Clive Pugh, a solicitor at the regulator, explains the changes.  

Prior to the Pensions Act coming into force in April 2005, insolvency practitioners appointed independent trustees to a pension scheme. However, under new law, the Pensions Regulator is now responsible for trustee appointments in insolvency. [s.23 of the Pensions Act 1995, as amended by the Pensions Act 2004.] 

In the nine months since the new requirements came into force, the Pensions Regulator has appointed about 50 independent trustees – far fewer than expected, particularly considering that in 2004 more than 14,000 insolvency events took place. 

There are several reasons why appointments may still be being made by insolvency practitioners. We believe that it is principally due to lack of awareness about the changes. However, it could also be due to a scheme attempting to circumvent the spirit of the rules, either by appointing a trustee before the company becomes insolvent; or by appointing individuals to carry out insolvency duties, including those of an independent trustee, while not officially named as a trustee. 

We acknowledge that there are instances in which an independent trustee may not be required. However, it is possible that insolvency practitioners are still making such appointments without notifying the regulator despite the new rules, and we wish to make insolvency practitioners aware of their duties. 

Ensuring a good deal for schemes 

Insolvency practitioners are unlikely to have the same stringent tendering processes that the Pensions Regulator uses, meaning that we are best placed to appoint an independent trustee. We use our trustee register to appoint independent trustees, all of whom are rigorously vetted to ensure they have the appropriate skills to protect members’ benefits. We maintain a profile of each trustee, enabling us to properly match each pension scheme to a trustee with the relevant expertise.

We also monitor fees charged, to ensure that schemes get a good deal. Unlike the regulator, insolvency practitioners have no statutory interest in reviewing fees and performance, and this is another reason why we are reminding them to notify us where an independent trustee needs to be appointed.

In recent months The Pensions Regulator has met with many large trustee firms – and many have questioned whether the Regulator is being notified of all relevant insolvency events. It is possible that some insolvency practitioners have taken it upon themselves to appoint a trustee from the Pensions Regulator trustee register. We would stress that this is not appropriate nor does it comply with the new requirements. 

Notifying the regulator 

Where we find that insolvency practitioners are failing to comply with the requirements, our initial approach will be to work with them to help them understand the new rules. 

However, where insolvency practitioners continue to fail to notify us to appoint an independent trustee we can issue an improvement notice to order them to comply in future. If this notice is subsequently ignored, we can impose a fine of as much as £5,000 for an individual, or £50,000 for an organisation. 

We now hope to see all insolvency practitioners notifying the regulator where a pension scheme needs an independent trustee, as the new law demands. 

We have already had productive talks with the Association of Recovery Professionals to raise industry awareness, and expect the number of reports made to increase. We would also encourage insolvency practitioners to contact us if they have any queries. 

General enquiries may be directed to policy.unit@insolvency.gov.uk

Telephone: 0207 291 6740

44. Licensing Act 2003 

The Licensing Act 2003 came into force on 24 November 2005 and replaces the Licensing Act 1964. The new regime replaces the old system, under which an alcohol licence applied to both the publican and the premises, with one involving separate Premises Licences and Personal Licences.

A Premises Licence enables the premises to be used for the sale of alcohol, the holder of which can be an individual, company or partnership. Premises used for the sale of alcohol must have a "Designated Premises Supervisor (DPS)", a natural person who must hold a Personal Licence. The Premises Licence holder and the DPS can be the same person, for example in the case of a publican running his own pub. All holders of licences under the previous regime were required to apply for new licences in accordance with the new legislation.

The Act requires all premises where licensable activities are being carried out to have a Premises Licence. Licensable activities include the sale of alcohol, the provision of entertainment and the sale of hot food after 11.00pm. It is an offence to provide these activities without a valid Premises Licence.

If the holder of a Premises Licence becomes insolvent, the licence lapses. Insolvency is widely defined to include the approval of a voluntary arrangement, the making of a bankruptcy order, and going into liquidation and administration.

Insolvency Practitioners should therefore note that the lapsing of a Premises Licence precludes any further trading by the debtor in respect of licensable activities at those premises. A Personal Licence will not lapse on insolvency. However, it is important to note that the Personal Licence alone does not authorise its holder to supply alcohol, as there must be a valid Premises Licence in force.

However, the Act contains further provisions that allow insolvency practitioners to issue an "interim authority notice" in respect of a lapsed Premises Licence. This effectively involves the insolvency practitioner taking on the responsibility for the Premises Licence on a temporary basis until it can be transferred to a third party.

Further information is available from the Department of Culture, Media and Sport website at http://www.culture.gov.uk/alcohol_and_entertainment/licensing_act_2003/  

General enquiries may be directed to policy.unit@insolvency.gov.uk

Telephone: 0207 291 6740

45. Civil Proceedings Rules 

Insolvency Practitioners should be aware that permission of the court is required for all appeals in insolvency proceedings in accordance with Part 52 of the Civil Procedure Rules (“CPR”), which, in The Insolvency Service’s view, is applied by Rule 7.49.

The way that the applicable Insolvency Rules (R7.47 and 7.48) are currently drafted appears to be inconsistent with Part 52 of the CPR. However, our view is that the Rules should follow the wording of Section 375 of the Insolvency Act 1986, which was amended by the Access to Justice Act 1999 to remove the words "with the leave of that judge or the Court of Appeal". Accordingly, these words should be discounted when reading Rule 7.47 and 7.48 and they are therefore silent on the question of leave and not inconsistent with the CPR and the Access to Justice Act 1999. Consequently, in our view, permission to appeal is required for all appeals in insolvency proceedings.

General enquiries may be directed to policy.unit@insolvency.gov.uk

Telephone: 0207 291 6740

46. Amendment to Section 188 The Insolvency Act 1986  

An amendment has been made to section 188 of the Insolvency Act 1986 (”the Act”) by The Companies (Registrar, Languages and Trading Disclosures) Regulations 2006 (SI 2006/3429) (“these Regulations”) which came in to effect on 1 January 2007. 

Colleagues in the DTI have brought forward these Regulations to implement into UK law amendments that were made to the First Company Law Directive (68/151/EEC) in 2003.  

Prior to the commencement of these Regulations section 188 of the Act required every invoice, order for goods, or business letter issued by or on behalf of a company being wound up, on which the company’s name appeared, to contain a statement that the company was being wound up. This includes any such documents issued by its liquidator. 

Amongst other things, these Regulations amend section 188 so as to require every invoice, order for goods, business letter or order form, whether sent in hard copy, electronic or any other form, to contain a statement that the company is being wound up. Additionally, all of the websites of a company being wound up must include a statement to that effect. 

The amendment extends to companies that were already in liquidation on the commencement date i.e. 1 January 2007.  Although no amendment was made to the equivalent provisions that exist within the Act for companies in Administration or Administrative Receivership, DTI colleagues who introduced these Regulations have confirmed that they will be bringing forward a further set of regulations to make equivalent changes to those two procedures by way of amendments to section 39 and paragraph 45 of schedule B1 to the Act, respectively. These further changes can be expected to commence on 1 October 2007, and in the meantime, as a matter of good practice, the Insolvency Service would encourage insolvency practitioners to apply the spirit of these Regulations to these other two procedures.  

General enquiries may be directed to policy.unit@insolvency.gov.uk

Telephone: 0207 291 6740

47. The Tribunals Court & Enforcement Bill: Debt Relief Orders

Debt Relief Orders (DROs) are a new form of non-court based debt relief aimed at debtors who owe relatively little, have nothing with which to repay their debts and cannot access any of the currently available debt resolution procedures either because they are ineligible as they cannot make repayments, or because they are unable to finance the relevant fees. It is proposed that debtors who meet the relevant criteria will be able to apply for a “debt relief order”, which will be made administratively by the official receiver. The effect of the order will be to provide a stay of enforcement proceedings against the debtor, the debts being discharged after 12 months.   As with bankruptcy, there will be penalties for misconduct by the debtor. 

The Tribunals Courts and Enforcement Bill inserts provisions into the Insolvency Act 1986 relating to the operation of DROs. Schedule 17 of the Bill provides for the insertion of a new Part 7A into the Insolvency Act 1986 which sets out the main legislative framework for the process.  Schedules 18 and 19 insert two new schedules into the Insolvency Act 1986, which provide more detail about the conditions to be met for a DRO and also more details about debt relief restrictions orders. Schedule 20 sets out the consequential amendments to the Insolvency Act 1986 and other legislation.  

The Bill was introduced into the House of Lords in November 2006, and, aside from one small technical amendment, completed its passage through that chamber without any changes to the debt relief provisions. The Bill is now before the Commons. Second reading was 5 March, and it is expected go to Committee later this month. 

Once the primary legislation is in place there will be a considerable amount of work to do in relation to the secondary legislation and DROs are not expected to be operational before April 2009. 

Further information about DROs is available on The Insolvency Service’s website www.insolvency.gov.uk   

General enquiries may be directed to policy.unit@insolvency.gov.uk

Telephone: 0207 291 6740

48. EU Directive 2005/36: Recognition of Professional Qualifications 

EU Directive 2005/36 (the Directive) comes into force across Europe by 20 October 2007 at the latest. For most professions in the United Kingdom, including that of acting as an insolvency practitioner, the Directive will be implemented into UK law by The European Communities (Recognition of Professional Qualifications) Regulations 2007 (the Regulations).  The Regulations are intended to come into force on 19 October 2007.  

In the context of insolvency practitioners the Directive provides that practitioners who have acquired professional qualifications in one relevant state (members of EU, Iceland, Liechtenstein, Norway and Switzerland) shall have access to that profession in the other relevant states. In practical terms an applicant from a relevant state, who wishes to become established in another state (the host state), will be able to apply for authorisation to a competent authority and that authority will be required to recognise equivalent professional qualifications obtained in the applicant’s home state or other relevant state where he is authorised to act in that state.  Where there are subjects required for the practice of acting as an insolvency practitioner in the UK that have not been covered by the qualification possessed by the applicant, it is possible for the authorising body to require the applicant to sit an aptitude test.  

Under the terms of the proposed Regulations all of the Recognised Professional Bodies and The Insolvency Service are listed as competent authorities and requests for authorisation may be referred to any appropriate competent authority. 

The Directive also makes provision for professionals to offer services on a temporary or occasional basis in a host state. Different criteria apply where the insolvency practitioner seeks to provide services on such a basis i.e. he/she will not have to meet the requirements that apply to those who wish to become established in the host state. For the immediate future The Insolvency Service and the Recognised Professional Bodies have agreed that all requests for registration as a temporary service provider will be dealt with by The Insolvency Service. 

Functions of the competent authorities 

Competent authorities are required to work in close collaboration with those of other European states, and provide assistance to them to facilitate application of the Regulations.   Competent authorities are required to exchange information regarding disciplinary action, criminal sanctions or other circumstances, which are likely to have consequences for the pursuit of activities under these Regulations.   For example, if an insolvency practitioner from a relevant state who is authorised by a UK competent authority is the subject of disciplinary measures, that information should be shared with the relevant competent authority in the insolvency practitioner’s home state.  That authority then has to consider the circumstances of the action, decide on the nature and scope of the investigations which need to be carried out, and inform the UK authority of the conclusions it has reached (i.e. what action, if any, it will take). 

Competent authorities are required to act as contact points for their profession, and to provide applicants and contact points in other relevant states with information concerning the recognition of qualifications, national legislation governing the profession, and professional standards e.g. SIPs and the ethical guide. Insolvency practitioners should contact their own RPB for information if they wish to become established or register as a temporary service provider in another relevant state. It is thought that publishing information on websites is likely to be pivotal to the effective working of the system.  It is vital that insolvency practitioners from relevant states are signposted to the professional rules relating to qualifications and disciplinary provisions so that they are fully aware of the conditions under which they will be operating in the UK.  

The Department for Innovation, Universities and Skills & The Department for Children Schools & Families are responsible for implementation of the Directive. Information about how people who are educated and trained in different Member States can work in the regulated fields in other Member States may be obtained by accessing http://www.dfes.gov.uk/europeopen/uktoeu/country_search.shtml 

Any enquiries regarding this article should be directed towards Devorah Burns telephone: 020 7291 6770 Email: devorah.burns@insolvency.gov.uk  

General enquiries may be directed to IP Policy Section telephone 020 7291 6772 Email: IPPolicy.Section@insolvency.gov.uk 

49. Money Laundering Regulations 2007 

The Money Laundering Regulations 2007 (MLR 2007), which will implement the provisions of the Third Money Laundering Directive, are due to come into force in the UK on 15 December 2007.  

 HM Treasury has recently published a draft of these regulations (http://www.hm-treasury.gov.uk./media/F/1/money_laundering_regulations2007.pdf) and this article provides a summary of the main changes that will affect the insolvency profession.  

Given that insolvency practitioners are subject to the Money Laundering Regulations 2003 (MLR 2003), which these new regulations will replace, the effect of these changes is not particularly onerous. Indeed, the most significant new requirement, that each regulated sector has a supervisor to monitor its practices and procedures in relation to money laundering and terrorist financing, already exists in the insolvency

profession, in the form of the eight authorising bodies in Great Britain. These existing supervisory arrangements will continue under the new regulations and compliance checks may be carried out by way of monitoring visits. The information about MLR 2003 provided in article 26 of this chapter will be withdrawn when the MLR 2007 come into force. 

New changes 

Identification (ID) requirements

The necessity to apply due diligence measures, such as identifying and verifying the identity of the customer, remains, except where such checks have already been carried out by other parts of the regulated sectors. In respect of higher risk customers, more enhanced due diligence measures will need to be applied. A high-risk customer is, for example, a client who has not been physically present for identification procedures or a “politically exposed person” (PEP). A PEP includes an individual who is, or has been, entrusted with a prominent public function by a state other than the UK or a Community institution or an international body.  In respect of customers who have not been physically present for identification purposes such enhanced measures would include obtaining additional documents, data or information to ensure the customer’s identity is established. In the case of a PEP, adequate measures would need to be in place to establish the source of funds or wealth involved in the occasional transaction or proposed business relationship.  

There is also a new requirement that firms undertake ongoing monitoring of existing business relationships. This is not only to ensure that due diligence data is kept up-to-date, but so that transactions can be scrutinised to ensure that they are consistent with the firm’s knowledge of “…the customer, his business and risk profile…” 

Record-Keeping

There is some relaxation in the retention of customer ID records, as it will be permissible, in most instances, to keep information obtained from ID documents rather than maintain actual copies of the documents. These records will still need to be retained for five years from the date the business relationship with the customer ends or when the occasional transaction is completed. 

Training 

There will be a requirement, similar to that contained within the MLR 2003, that all relevant employees of a firm are made aware of the law relating to money laundering and terrorist financing. An additional requirement will be that these employees will need to receive regular training in how to recognise and deal with transactions and other activities, which may be related to these areas.  

Compliance management 

Aside from having in place internal controls, policies and procedures to forestall and prevent money laundering, firms will need to have a risk assessment in place which will need to be adhered to when carrying out due diligence checks.  

Any enquiries regarding this article should be directed towards Steve Lamb, Insolvency Practitioner Policy Section, area 5.6, The Insolvency Service, 21 Bloomsbury Street, London WC1B 3SS; telephone: 020 7637 6698; email: steve.lamb@insolvency.gov.uk 

General enquiries may be addressed to IPPolicy.section@insolvency.gov.uk; telephone number 020 7291 6772. 

50. Pensions Act 2004 

Insolvency practitioners are reminded that they have a statutory obligation (section 120 of the Pensions Act 2004) to notify the Pension Protection Fund (PPF), the Pensions Regulator and the trustees or managers of a pension scheme when an employer is the subject of formal insolvency proceedings and there is an associated occupational pension scheme.  That notice should generally be sent within 14 days of the start of the insolvency. 

Where a scheme enters an “assessment period” (the PPF will send you a letter to let you know where that has happened) the creditor rights of the scheme trustees will vest in the PPF by virtue of section 137 of the Pensions Act 2004.  Insolvency practitioners should therefore send any notice sent to creditors to the PPF if the scheme is a possible creditor in the proceedings. 

On it becoming apparent whether (a) the scheme will be rescued (e.g. a new employer takes it on), or (b) it is not rescued (e.g. all employees are made redundant and the business is closed), or (c) the insolvency practitioner’s term of office comes to an end before the position becomes clear (e.g. there is a rescission of the winding-up order), practitioners should send the PPF a further notice (section 122 of the Pensions Act 2004).  

Articles 38 and 43 of this chapter also provide further information regarding these provisions. 

Necessary forms can be found at http://www.pensionprotectionfund.org.uk/index/forms.htm.   

Further guidance can be found at http://www.pensionprotectionfund.org.uk/insolvency_guidance.pdf 

Any enquiries regarding this article should be directed towards The Pensions Regulator customer support telephone: 0870 606 3636 email: customersupport@thepensionsregulator.gov.uk    

51. The “Trident Fashions” case and The Non-Domestic Rating (Unoccupied Property) Regulations 1989                       

The recent decision in the “Trident Fashions” case has led The Insolvency Service’s Policy Unit to open discussions with the Department of Communities and Local Government (“DCLG”) to ascertain if vacant properties of companies in administration can be added to the exemption from non-residential rates (in The Non-Domestic Rating (Unoccupied Property) Regulations 1989) currently enjoyed by companies in liquidation.  DCLG consulted on the matter and have recently issued the Government’s response, stating that administration will be aligned with liquidation in this respect.  Subject to the parliamentary process, this change is being considered for implementation on 1 April 2008. 

DCLG are only responsible for this legislation as it applies to England and Wales; in Scotland this matter is devolved to the Scottish Executive and the relevant instrument (that mirrors the English one quoted above) is The Non-Domestic Rating (Unoccupied Property)(Scotland) Regulations 1994.  Policy Unit have approached officials in the Executive and, subject to consultation and the Scottish parliamentary process, they are amenable to making such a change. 

There has been some consideration as to whether the decision in Trident Fashions would have the same effect in Scotland in any event, given the different construction of the Insolvency (Scotland) Rules 1986 (“I(S)R86”) from their English counterparts.  Rule 2.41 of the I(S)R86 applies the distribution rules from Part 4 of those Rules, which includes a schedule of priority of payment of expenses at Rule 4.67. 

In the Insolvency Rules 1986, Rule 2.67, on priority of expenses, sits in a chapter which applies to all administrations, immediately preceding Chapter 10 of Part 2, which relates to distributions.  The corresponding Rule in the I(S)R86 is placed in the chapter on distributions to creditors itself.  The Insolvency Service has formed the view that the Rule on administration expenses can therefore only apply where there is a distribution.  As there can be no distribution to creditors if the expenses are not fully paid, logically the expenses Rule can never be applied in those cases where the order of priority of payment is needed and there is no equivalent statutory provision for such Scottish administrations to that which applies in England and Wales. 

This discrepancy between Scotland and England & Wales is undesirable and, subject to targeted consultation and the parliamentary process, a rule change will be made via an amending statutory instrument, to ensure that the order of priority of payment of such expenses in Scottish administrations are placed on a statutory basis.  It is likely that this rule change would come into force before any change is made to the Non-Domestic Rating (Unoccupied Property)(Scotland) Regulations 1994. 

Insolvency practitioners will be informed of a commencement date for this Statutory Instrument (and any brought forward by the Scottish Executive regarding non-residential rates for vacant properties of companies in administration) in a subsequent issue of Dear IP.

Any enquiries regarding this article should be directed towards
Steven Chown, Policy Unit, Area 5.7, 21 Bloomsbury Street, London, WC1B 3QW; telephone: 020 7637 6501 email: steven.chown@insolvency.gov.uk 

General enquiries may be directed to Policy.unit@insolvency.gov.uk;

Telephone: 0207 291 6740

52. EU Directive 2006/123: Services in the Internal Market

On 5 November 2007 the Department for Business Enterprise and Regulatory Reform (BIS) issued a consultation document seeking views on the implementation of EU Directive 2006/123/EC which covers the provision of Services in the Internal Market (the Services Directive). The aim of the Services Directive is to break down the barriers that make it difficult for businesses to set up in other member states or provide services across borders on a temporary basis.

The Services Directive was agreed in December 2006 and the Government is required to ensure that UK law and practices comply with the requirements of that Directive before 28 December 2009. Replies to the consultation are sought by 11 February 2008.

Although EU Directive 2005/36: Recognition of Professional Qualifications takes precedence over the provisions of the Services Directive, and some of the issues are common to both, The Insolvency Service considers that it would be useful if insolvency practitioners could consider the proposals set out in the consultation.

The consultation document may be accessed via BIS’s website at

http://www.BIS.gov.uk/consultations/page42211.html

Any enquiries regarding this article should be directed toward
Devorah Burns, telephone 020 7291 6770, email: devorah.burns@insolvency.gov.uk

General enquiries may be directed to IP Policy Section telephone 020 7291 6772, email IPPolicy.Section@insolvency.gov.uk  

53. Non-Domestic Rates in Administration 

The Non-Domestic Rating (Unoccupied Property)(England) Regulations 2008 are due to come into force on 1 April 2008.  These changes have been made by the Department for Communities and Local Government following representations made by the Insolvency Service as a result of the decision in the “Trident Fashions” case, outlined in article 51 of the December 2007 issue of Dear IP. 

The regulations revoke the Non-Domestic Rating (Unoccupied Property) Regulations 1989 in their application to England by replacing them with new regulations extending the exceptions to Section 45 of the Local Government Finance Act 1988, to companies in administration (see Regulation 4(l)). Administrators will thereby be in the same position as liquidators. The legislation can be accessed via the following link:

http://www.opsi.gov.uk/si/si2008/uksi_20080386_en_1

These changes do not apply in Wales but officials in the Welsh Assembly have confirmed that they are considering making an equivalent change to the Non-Domestic Rating (Unoccupied Property) Regulations 1989, insofar as they apply to Wales. 

In Scotland, the corresponding regulations in that jurisdiction, The Non-Domestic Rating (Unoccupied Property) (Scotland) Regulations 1994, will also be amended to include empty properties of companies in administration among the list of exceptions from non-domestic rates from 1 April 2008.  The amending instrument is the Non-Domestic Rating (Unoccupied Property) (Scotland) Amendment Regulations 2008 and is available via the following link: 

http://www.opsi.gov.uk/legislation/scotland/ssi2008/ssi_20080083_en_1

Any enquiries regarding England and Wales should be directed towards
Alison Parine, Policy Unit, Area 5.7, 21 Bloomsbury Street, London, WC1B 3QW; telephone: 020 7637 6365 email: alison.parine@insolvency.gov.uk and for Scotland please contact Steven Chown, Policy Unit, Area 5.7, 21 Bloomsbury Street, London, WC1B 3QW; telephone: 020 7637 6501 email: steven.chown@insolvency.gov.uk 

General enquiries may be directed to Policy.unit@insolvency.gov.uk;

Telephone: 0207 291 6740

54. The Companies (Trading Disclosures) (Insolvency) Regulations 2008 (S.I. 2008/1897) 

Insolvency practitioners should be aware that the above named statutory instrument came into force on 1 October 2008.  It made changes to the Insolvency Act 1986 (“the Act”), and amends the corresponding provisions of the Insolvency (Northern Ireland) Order in similar terms. 

The regulations require that a company that is —  

• in administrative receivership (England & Wales, section 39 of the Act); or
• in receivership (Scotland: section 64 of the Act); or
• in administration (England, Wales and Scotland: paragraph 45 of Schedule B1 to the Act); or
• subject to a moratorium relating to a proposed CVA (England, Wales and Scotland: paragraph 16 of Schedule A1 to the Act)

must display the fact that the company is subject to the relevant insolvency procedure on any and all of the company’s websites.    The category of documents which must display the fact that the company is subject to the relevant insolvency procedure is extended to cover documents whether they are sent in hard copy, electronic or some other form and includes orders for services.  In the case of administrative receivership or, in Scotland, receivership or where there is in force a moratorium with a view to a CVA being proposed, the requirement for documents to disclose the fact that the company is subject to the relevant insolvency procedure is extended to all the documents issued by or on behalf of the company rather than those on which the name of the company appears. It will be noted that this was previously the position with regard to administration.   

The instrument extends to other insolvency procedures the changes made by The Companies (Registrar, Languages and Trading Disclosures) Regulations 2006 (S.I. 2006/3429) that altered section 188 of the Act, relating to liquidation, that came into force 1 January 2007. This change was reported in Issue No. 31 of Dear IP (February 2007). 

The instrument also makes minor amendments to section 188 of the Act with respect to liquidation.  The relevant documents now include an order for services and the requirement for documents to disclose the fact that the company is in liquidation is extended to all the documents issued by or on behalf of the company rather than those on which the name of the company appears. 

Any enquiries regarding this article should be directed towards Steven Chown, Insolvency Service, Policy Unit, 21 Bloomsbury St, London WC1B 3QW. Telephone: 020 7637 6501, email: steven.chown@insolvency.gov.uk

General enquiries may be directed to Policy.Unit@insolvency.gov.uk

55. The Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 (S.I. 2007/991) 

These regulations implement various aspects of the EU Energy Performance of Buildings Directive, which lays down requirements for the production of energy performance certificates (“EPC”) when buildings are constructed, sold or rented out. The final provisions of the regulations were brought into force with effect from 1 October 2008, following a phased introduction. An EPC is distinct from a Home Information Pack (“HIP”), which applies solely to residential property, although HIPs also incorporate EPCs.The regulations require sellers to make an EPC available to prospective buyers and tenants of buildings at the earliest opportunity (regulation 5).  In circumstances where a relevant building comprised within an insolvent estate is being sold in our view it would be incumbent upon the insolvency officer holder to provide the EPC.  The costs of providing the EPC would then fall to be charged to the estate. Further information is available on the Department of Communities and Local Government website, at:

http://www.communities.gov.uk/planningandbuilding/theenvironment/energyperformance/publications/ 

Any enquiries regarding this article should be directed towards Toby Watkinson, IP Policy Section, Area 5.7, 21 Bloomsbury Street, London WC1B 3QW; telephone: 020 7637 6566;  email: toby.watkinson@insolvency.gov.uk   

General enquiries may be directed to IPPolicy.Section@insolvency.gov.uk  

Telephone: 020 7291 6772

56. Pensions Act 2004 – new online section 120 notice service

Insolvency practitioners will soon be able to submit section 120 notices – which inform the Pension Protection Fund (PPF) about a company insolvency – through a new online service on the PPF website.

Under the relevant provisions, insolvency practitioners must send section 120 notices when any company which has an occupational pension scheme becomes insolvent.

From 3 April 2009, insolvency practitioners should, for the first time, be able to submit these notices online.

The new service:

• makes use of a number of databases held by the PPF and will save insolvency practitioners considerable time, cost and effort
 
• enables insolvency practitioners to enter the employer’s name, their individual IP registration number, the date they were appointed to act for that employer and the type and date of the insolvency event directly onto the web-based form rather than send a paper section 120 return.  Insolvency practitioners should use the last name used by the company for meaningful trading, as any last minute name changes may not have filtered through to the PPF
 
• automatically sends a notice to the PPF, the Pensions Regulator and the scheme trustees if an occupational pension scheme exists, and
 
• sends a reply to insolvency practitioners confirming that a notice has been sent, and to whom – or that there is no eligible scheme.
 

But, there may be instances where the PPF does not hold the necessary information. If that is the case, it will tell practitioners to meet their statutory obligations by sending a paper section 120 notice, as they do now.

The new service can be found on the PPF website at http://www.ppf-forms.org.uk.

Further information about section 120 obligations can also be found on the website at  www.pensionprotectionfund.org.uk.

Any enquiries regarding this article should be directed towards the PPF, Knollys House, 17 Addiscombe Road, Croydon, Surrey CR0 6SR.   Telephone: 0845 600 2541,  email: information@ppf.gsi.gov.uk  

57. FSMA 2000 - insolvency practitioners’ responsibility to report to the Financial Services Authority

The Financial Services Authority (FSA) wishes to clarify what it expects of all insolvency practitioners when they implement insolvency procedures in relation to FSA-regulated firms.  

Part XXIV of the Financial Services and Markets Act 2000 (FSMA) sets out the FSA’s powers in relation to insolvency procedures for firms authorised by the FSA, and places certain obligations on insolvency practitioners.

Principally, the FSA must be sent any notice or documentation required to be sent to creditors of an authorised firm (see sections 362(3), 365(4) and 363(4) of FSMA). Insolvency practitioners should therefore ensure that the FSA is treated as if it were a creditor by sending it all creditor notices and reports, both before and after their appointment.

Insolvency practitioners should be aware that an administrator cannot be appointed under paragraph 22 of schedule B1 of the Insolvency Act 1986 in relation to a regulated firm unless the FSA consents to the appointment (see section 362A FSMA).  Administrators risk their appointment being declared invalid if this consent is not sought.

Consent is provided by the FSA in writing and must be filed with the court along with the notice of intention to appoint an administrator under paragraph 27 of schedule B1.  To receive the required consent the insolvency practitioner should contact the FSA using the firm’s usual supervisory contact, which will be either a named relationship manager (the firm will have contact details) or the FSA Customer Contact Centre.

Insolvency practitioners should also note that if they suspect a firm is or has been carrying on regulated activities without proper authorisations, they must report this without delay to the FSA – see sections 361 (administrators), 364 (receivers), 370 (liquidators) and 373 (insolvency practitioners).

Any enquiries regarding this article should be directed to the named supervisor of the firm or the FSA Customer Contact Centre, 25 The North Colonnade, Canary Wharf, London E14 5HS. Telephone: 0845 606 9966, fax: 020 7066 0991 or email: fcc@fsa.gov.uk

58. EC Regulation on Insolvency Proceedings 

This article brings the information previously issued in the March 2002 issue of “Dear IP” relating to the EC Regulation on Insolvency Proceedings 2002 (“the Regulation) up to date.  This follows, in particular, the coming into force of the Regulation on 31 May 2002, the accession of new Member States since that date, and the changes to the Insolvency Act 1986 and Insolvency Rules 1986 resultant from the coming into force of the Regulation. 

GUIDANCE NOTES 

                  Part I – An Overview of the Regulation 

                  Part II – Flowchart of Certain Procedures & Provisions 

                  Part III – Legislative Changes 

PART I – An Overview of the Regulation  

1.                        Background  

The EC Regulation on insolvency proceedings (“the Regulation”) was adopted by the Council of the European Union on 29 May 2000 and came into force throughout the EU on 31 May 2002 (in fact, Denmark is not a party to the Regulation and where in this article reference is made to the EU or its Member States that excludes Denmark).  The purpose of the Regulation is to improve the efficiency and effectiveness of insolvency proceedings with a cross-border dimension within the EU by either simplifying or removing formalities previously associated with recognition and enforcement.  The Regulation is not an attempt to harmonise the insolvency laws of the individual Member States but rather it provides a framework within which the different insolvency regimes can interact with more predictable outcomes. 

Unlike an EU Directive, the Regulation does not need to be implemented by the Member States.  It is directly applicable and becomes an integral part of each Member State’s law.  The Regulation will prevail in the event of any incompatibility with the national law. However, in order to ensure that the Regulation will be fully workable and enforceable in the United Kingdom, a small number of amendments have been made to both primary and secondary insolvency legislation.  An overview of the changes made in relation to England and Wales (the corporate primary legislation changes also apply in relation to Scotland) are given in Part III of this article.  

2.                        Scope of Application  

The Regulation applies only where a debtor has his centre of main interests (commonly referred to as the “COMI”) (see recital 13) within the EU and deals only with jurisdiction within the EU.  It is applicable to collective insolvency proceedings in relation to individuals and legal persons, but not to insurance undertakings, credit institutions and certain investment undertakings (article 1).  To be covered by the Regulation, Member States’ insolvency proceedings must not only comply with the general provisions of article 1.1, they must also be listed in Annex A and/or B to the Regulation.  For the purposes of the Regulation, the United Kingdom represents one jurisdiction and includes Gibraltar.   The relevant proceedings in relation to the United Kingdom are:  

• Winding up by or subject to the supervision of the court 

• Creditors’ voluntary winding up (with confirmation by the court)  

• Administration, including appointments made by filing prescribed documents with the court  

• Voluntary arrangements under insolvency legislation  

• Bankruptcy or sequestration 

Doubt as to the applicability of the Regulation to administrations where the administrator is appointed out of court was removed by Council Regulation 603/2005 of 21 April 2005, where such procedures were added to the lists contained in Annexes A-B.  

A creditors’ voluntary winding up will not enjoy the benefits of automatic recognition and enforcement without a formal confirmation by the court.  A new procedure has been put in place for this purpose (see Part III).  

The Regulation does not apply to receiverships – administrative or otherwise – as these are not collective proceedings.  The insolvency of the debtor is a prerequisite for recognition and consequently the Regulation does not apply to members’ voluntary winding up or to winding-up orders made solely on just and equitable grounds, or those made on the grounds of public interest under section 124A of the Insolvency Act 1986.  

The Regulation has no retrospective effect.  Under article 43, it applies only to relevant insolvency proceedings opened (see article 2(f)) on or after 31 May 2002.  Acts done by the debtor before that date will continue to be governed by the law which was applicable to them at the time they were done.  

3.                        Proceedings under the Regulation  

Article 3 of the Regulation permits Member States’ courts (defined for these purposes more broadly than usual - see article 2(d)) to open two types of insolvency proceedings.  

Main Proceedings.  These can be opened only in the Member State where the debtor has his “centre of main interests” (the place where he conducts the administration of his interests on a regular basis and which is consequently ascertainable by third parties – recital 13).  Subject to the existence or subsequent opening of territorial proceedings (which largely oust the jurisdiction of main proceedings in the Member State where the territorial proceedings are opened) main proceedings have universal effect throughout the EU.  The meaning of “centre of main interests” has been the subject of judicial consideration in a number of EU states, and this is an area of developing case-law.  This article does not seek to discuss these developments in any detail, but the following are leading cases on the subject: 

• Skjevesland v Gerevan Trading Co Ltd [2002] EWHC 2898 (Ch) 

• BRAC Rent-a-Car International [2003] EWHC 872 (Ch) 

• Re Daisytek-ISA Ltd [2003] BCC 562 

• Shierson v Vlieland-Boddy [2005] BCC 949 

• Re Eurofood IFSC [2006] BCC 397 

• French Republic v Klempka [2006] BCC 841 

• Stojevic v Official Receiver [2007] BPIR 141  

Territorial Proceedings.  These can be opened in any Member State in which the debtor has an establishment (defined in article 2(h) of the Regulation as “any place of operations where the debtor carries out a non-transitory economic activity with human means and goods”). Their effects are restricted to those assets situated (see article 2(g)) in that Member State.  Where such proceedings are opened after main proceedings, they are termed secondary proceedings and can only be winding-up proceedings (listed in Annex B), and not rescue or rehabilitation proceedings.  

From a United Kingdom perspective, a number of important changes flow from this.  Firstly, the wide jurisdiction which United Kingdom courts have asserted to open insolvency proceedings in relation to debtors whose centre of main interests is not in the United Kingdom will be restricted.  Secondly, the scope to request the opening of territorial proceedings before the opening of main proceedings is limited to those creditors established in that State or whose claim arises directly from the operation of the establishment (article 3.4).  Finally, the reach of the “liquidator” (the term the Regulation uses for the insolvency officeholder – see Annex C) in territorial proceedings is restricted to those assets situated in the Member State where the proceedings were opened, irrespective of whether or not main proceedings have been opened in relation to the debtor.  

4.                        The Law Applicable  

Under the Regulation, the general rule is that the national law of the State in which the proceedings are opened is the applicable law and it is that law that determines the conditions for the opening, conduct and closure of the proceedings.  Article 4.2 contains a non-exhaustive list of the matters to be determined by the law of the proceedings.  Importantly, however, the Regulation contains a number of substantive conflict of laws provisions.  These are exceptions to the general rule and have the effect of subjecting situations where, for example, property is, or parties are, situated in a Member State other than that in which the insolvency proceedings have been opened to laws other than that of the proceedings.  Clearly it would be impractical to explore these complex provisions in any detail in guidance of a general nature, but the conflict provisions apply in the following areas:- 

• Creditors or third parties holding secured (or “in rem”) rights over assets
  (article 5).  

• Set off (article 6).  

• Reservation of title (article 7).  

• Contracts relating to immovable property (article 8).  

• Rights and obligations in relation to payment or settlement systems or financial markets (article 9).  

• Employment contracts and relationships (article 10).  

• Effect of insolvency proceedings on debtor’s rights in immovable property, ships or aircraft subject to registration in a public register (article 11).  

• Community patent, trade mark or similar rights (article 12).  

• Voidness, voidability or unenforceability of detrimental acts (article 13).  

• Protection of third party purchasers of immovable or registered assets (article 14).  

• Effect of insolvency proceedings on pending lawsuits concerning assets or rights of which the debtor has been divested (article 15).  

5.                        Recognition of Insolvency Proceedings  

Proceedings opened under the Regulation will be recognised without any formality in all Member States, subject only to normal public policy considerations (articles 16 and 26).  Main proceedings will become immediately effective in all Member States as long as no territorial proceedings have been opened there (article 17).  Subject to the same condition, the liquidator appointed in main proceedings will immediately be able to exercise his powers in other Member States and even the liquidator in territorial proceedings will be able to act to recover assets removed to another Member State after the proceedings for which he was appointed were opened.  At all times the liquidator must comply with the general law of the Member State in which he intends to take action, but a certified copy of his appointment (with an appropriate translation) is all that he will need to be able to act (articles 18 and 19).  

Historically, insolvency is an area that has been excepted from the ambit of the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters.  Under article 25 of the Regulation, certain specified judgments of the court which has opened insolvency proceedings will also be recognised without formality and fall to be enforced in accordance with the Brussels Convention (now superseded by Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters known as the “Judgments Regulation” or “Brussels I”). 

The Regulation contains substantive provisions dealing with the position of creditors who have obtained payment after the opening of insolvency proceedings, as well as by way of distribution in other insolvency proceedings (article 20) and the effectiveness of discharge of third party obligations after the opening of proceedings (article 24).  So as to achieve greater certainty in these areas, liquidators are permitted to publish notice of the judgment opening their proceedings in other Member States (article 21).  The liquidator in main proceedings is also authorised to request registration of the judgment in the public registers (for example, the Land Register) in other Member States. 

6.                        Secondary Insolvency Proceedings

For the purpose of improving the efficiency and effectiveness of insolvency proceedings which have cross-border effects, the Regulation provides a structure for the interaction of multiple insolvency proceedings in relation to the same debtor.  

The Regulation affords primacy to main insolvency proceedings and the opening of such proceedings will serve as proof of the debtor’s insolvency for the purposes of opening secondary insolvency proceedings.  To achieve this primacy the Regulation not only imposes a duty on liquidators to cooperate with and communicate information to each other, it also provides the liquidator in main proceedings with a range of powers in relation to secondary proceedings.  He is empowered to –

• request the opening of secondary proceedings (article 29)

• request the stay of the process of realisation of assets in secondary proceedings (article 33)

• propose a rescue plan or composition in secondary proceedings (article 34)

• request that pre-existing territorial proceedings be converted into winding-up proceedings (article 37).

Where territorial insolvency proceedings have been opened before main proceedings, following the opening of main proceedings they are thereafter to be treated as secondary proceedings insofar as the progress of those proceedings allows (article 36).

7. Information for Creditors and Proving of Claims

The provisions in the Regulation in relation to the provision of information to creditors and the proving of claims are generally straightforward but occasionally novel.

The Regulation provides (at article 40) that, when insolvency proceedings are opened in a Member State, the court (or liquidator appointed by the court) shall send notice of the opening of the proceedings to creditors in other EU States.  Further, article 42(1) provides that the notice required under article 40 shall be headed with “Invitation to lodge a claim.  Time limits to be observed.” in all the official languages of the EU (there are 23 official languages – see http://ec.europa.eu/education/languages/languages-of-europe/doc135_en.htm   ).  Schedule A of this article of “Dear IP” has this phrase translated into those 23 languages, along with Russian – with each language identified.

Article 39 of the Regulation gives creditors who have their habitual residence, domicile or registered office in a EU Member State the right to lodge claims in insolvency proceedings opened in another Member State.  The claim may be in any of the official languages of the EU, but must be headed with the phrase “Lodgement of claim” in (one of) the official language(s) of the State of the opening of the proceedings (article 42(2)). Schedule B of this article of “Dear IP” has this phrase translated into the 23 official languages of the EU.

In each of the above cases, the translations have been carried out by The Insolvency Service’s translation agents and have not been provided by, or approved by, the European Commission.

Creditors can be required to provide a translation of their claim into the language of the State in which the proceedings were opened (article 42).

The novel aspect of the Regulation in relation to proving of claims is that, not only are liquidators in both main and secondary proceedings empowered to participate in other proceedings on the same basis as the creditor, they can also prove the claims which have been proved in proceedings for which they were appointed in other insolvency proceedings (article 32).  See above for the language requirements of such a claim.

SCHEDULE A

SCHEDULE B

PART II - Flowcharts of Certain Procedures & Provisions

Download/View in Word format

PART III  - Legislative Changes

An EC Regulation has direct effect and there is no need for a Member State to pass legislation giving effect to the Regulation.  In fact, States are under an obligation not to pass legislation or other measures giving effect to the Regulation, unless implementing steps are expressly required in the Regulation (this is not the case with the Insolvency Regulation) or where States choose to adopt rules to make the Regulation fully workable and enforceable within the existing national legal framework.

As a result of the direct applicability of the Regulation, any existing provisions of national law (including case law precedents) which are contradictory to the provisions of the Regulation cease to be applicable automatically upon the Regulation being given effect.

In the case of the Insolvency Regulation, it was necessary to make some limited changes to both primary and secondary insolvency legislation in the UK to ensure that the Regulation is fully workable and enforceable.  An overview of the main changes in relation to England and Wales is provided below.

The Insolvency Act 1986 (Amendment) (No.2) Regulations 2002

Amendments to the Act made by these Regulations provide that –

• companies in relation to which UK courts may open proceedings under the EC Regulation may take advantage of various procedures under the Act (Regulations 4, 5 and 9);

• the jurisdiction of the courts is clarified (Regulations 6, 7 and 10);

• provision is made to allow temporary administrators appointed by courts in other Member States of the European Union and liquidators appointed in main proceedings to present winding up petitions and bankruptcy petitions (Regulations 8 and 13);

• provision is made to make it clear that the conditions which must be satisfied in order to enable a person to present a bankruptcy petition are subject to the EC Regulation (Regulation 14);

• the definition of "property" in the Act is modified (Regulation 18); and

• other technical amendments are provided for (Regulations 11, 12, 15, 16 and 17).

The Insolvency (Amendment) Rules 2002 amending the Insolvency Rules 1986

The main amendments to the 1986 Rules are –

• to provide procedures for the conversion of company and individual voluntary arrangements and administration into winding up for companies and bankruptcy for individuals on the application of a liquidator appointed in another EU member in main proceedings ("Member State liquidator" and "main proceedings" are defined by new definitions by reference to the EC Regulation inserted into the 1986 Rules);

• to note particular rules in the 1986 Rules to which the right of a Member State liquidator to participate in proceedings on the same basis as a creditor is relevant, for example, entitlement to vote under Rules 2.22 (administration), 4.67 (winding up) and 6.93 (bankruptcy);

• to provide, under the 1986 Rules, for giving notice of insolvency proceedings, and to give notice of various steps taken in such proceedings, to Member State liquidators;

• to provide, under the 1986 Rules, for the right of a Member State liquidator appointed in main proceedings or a temporary liquidator to be able to apply for the appointment of a provisional liquidator of a company or an interim receiver of an individual ("temporary administrator" is defined by a new definition by reference to the Regulation inserted into the 1986 Rules);

• to provide a procedure allowing a liquidator of a company being wound up voluntarily under Part IV of the Insolvency Act 1986 to apply to court (using a newly prescribed form) for the confirmation of the proceedings, such confirmation being a pre-requisite for recognition of a voluntary winding up in other Member States under the EC Regulation;

• to remove conflicts between the EC Regulation and the Rules, for example, in new Rule 6.116(3) in relation to the rights in rem (secured rights) of creditors where the secured assets are in other Member States;

• to make provision with regard to voting at creditors' meeting and proving for dividends in insolvency proceedings where the EC Regulation applies; and

• to provide revised forms, among others forms, for petitions and orders which require petitioners and courts to consider the applicability of the EC Regulation to the proceedings in question.

The Insolvency Act 1986 (Amendment) Regulations 2005

Amendments to the Act made by these Regulations clarified the effect of the EC Regulation on the definition of company in Parts I and II of the Act to deal with uncertainty that had arisen following the decision of the High Court in Re Salvage Association [2003] 3 All ER 246. 

Any enquiries regarding this article should be directed towards David Payne  telephone: 01702 442374  email: David.Payne@insolvency.gov.uk

General enquiries may be directed to technical.section@insolvency.gov.uk, telephone 0207 291 6776.

59. The Companies (Trading Disclosures) (Amendment) Regulations 2009 (S.I. 2009/218)

These Regulations came into effect on 1 October 2009 and deal with trading disclosures to be made by a company. The Regulations amend the Companies (Trading Disclosures) Regulations 2008 (S.I. 2008/495) to provide two further exceptions from the obligation on a company to display its registered name at business premises.

The first exception applies if a company has had a liquidator, administrator or administrative receiver appointed and the registered office, inspection place or place of business of the company is also a place of business of that liquidator, administrator or administrative receiver (regulations 2 and 3).

Regulation 3 provides an exception from the obligation on a company to display its registered name at any location (other than its registered office and any place at which it makes its company records available for inspection) at which it carries on business. This exception depends on whether the registrar of companies is prevented from disclosing to a credit reference agency the residential address of every director of the company who is an individual.

The Regulations are available on the OPSI website at the following address: http://www.opsi.gov.uk/si/si2009/uksi_20090218_en_1

General enquiries regarding this article may be directed towards IP Policy Section, 3^rd Floor Zone B, 21 Bloomsbury Street, London, WC1B 3QW; telephone: 020 7291 6772; email: IPPolicy.Section@insolvency.gov.uk

The Provision of Services Regulations 2009 (SI 2009/2999) (‘The Services Regulations’) transpose the main provisions of the EU Services Directive 2006/123/EC for all service providers in the UK (see Article 52 of this chapter). Insolvency practitioners are included as service providers under the terms of the Directive.

Insolvency practitioners should familiarise themselves with the contents of the Services Regulations which can be accessed on the OPSI website at:

http://www.opsi.gov.uk/si/si2009/uksi_20092999_en_1

The Regulations for the most part set out the duties of the competent authorities, which include the Recognised Professional Bodies, in relation to the provision of services within the UK. However, Part 2 of the Regulations sets out the duties of service providers and insolvency practitioners are already required to comply with most of the requirements of that Part. To assist insolvency practitioners the main points of Part 2 of the Services Regulations to note are:

Any enquiries regarding this article should be directed towards
Devorah Burns, Zone B, 3^rd Floor, 21 Bloomsbury Street, London, WC2B 3QW. Telephone: 020 291 6770 Email: Devorah.Burns@insolvency.gov.uk

General enquiries may be directed to IPPolicy.section@insolvency.gov.uk

61.  The Education (Student Loans) (Repayment) (Amendment) Regulations 2010 (SI 2010/661)  

On 9 March 2010 The Education (Student Loans) (Repayment) (Amendment) Regulations 2010 (SI 2010/661) were laid in Parliament.  

The statutory instrument came into force on 6 April 2010 and has the effect of removing student loans as a debt provable in an individual voluntary arrangement. 

The SI and Explanatory Memorandum can be accessed on  

• http://www.opsi.gov.uk/si/si2010/uksi_20100661_en_1
• http://www.opsi.gov.uk/si/si2010/em/uksiem_20100661_en.pdf  

Any enquiries regarding this article should be directed towards Karen Duncan at the Department for Business, Innovation and Skills, telephone: 01325 390192, email: karen.duncan@bis.gsi.gov.uk  or alternatively to Janet Crame, telephone: 01325 391202,  email:  janet.crame@bis.gsi.gov.uk 

General enquiries may be directed to policy.unit@insolvency.gov.uk

Telephone:  020 7637 1110

62. Bribery Act 2010 – notice of consultation 

Insolvency practitioners may be aware that the Bribery Act 2010 will come into effect in April 2011. The Ministry of Justice is consulting on the guidance to be issued about commercial organisations preventing bribery (section 9 of the Act) and the closing date for comments is 8 November 2010

This consultation is open to anyone with an interest in the guidance to be published under section 9 of the Bribery Act 2010. The guidance is about procedures which commercial organisations can put in place to prevent persons associated with them from bribing.

A copy of the consultation may be accessed via the following link:

http://www.justice.gov.uk/consultations/briberyactconsultation.htm

Any enquiries regarding this article should be directed towards Devorah Burns, 21 Bloomsbury St, London WC1B 3QW telephone:  020 7291 6770 email:  devorah.burns@insolvency.gov.uk  

General enquiries may be directed to email: ippolicy.section@insolvency.gov.uk  

Telephone:  020 7291 6772

63. Anti- Money Laundering update following developments in Ukraine

The Financial Conduct Authority (FCA) recently reminded financial institutions of their obligations under the Money Laundering Regulations 2007 and the Proceeds of Crime Act 2002 in light of developments in Ukraine:

(http://www.fca.org.uk/about/what/protecting/financial-crime/money-laundering/events-ukraine).

In particular, financial institutions and insolvency practitioners will need to be vigilant to the risk of corrupt asset flight.

Corrupt asset flight may be facilitated through companies and other legal arrangements, or other transactions designed to quickly liquidate assets held in the UK. Robust beneficial ownership checks are therefore vital.

Insolvency practitioners should consider the impact of these developments on their anti-money laundering policies and procedures in a risk-based manner, and should take the steps necessary to ensure they continue to meet their legal and regulatory anti-money laundering and reporting obligations. Specifically, insolvency practitioners will need to have appropriate systems and controls for due diligence, on-going monitoring and reporting of suspicious transactions, including those involving Politically Exposed Persons (PEPs).

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