1. The Role of the Nominee and Application of Professional Judgement The Service monitoring teams have encountered a number of instances where the nominee appears to have acted merely as a post-box for the proposal, and not queried the information presented. It is considered that such actions result in a high percentage of arrangements failing either at the first meeting of creditors or following approval. The nominee must ensure that the proposal meets the criteria set out in the legislation, but that is not sufficient reason to conclude that the proposal is fit to be put to creditors: the practitioner must also use professional judgement in deciding whether or not the proposal is feasible. Under Section 256 of the Insolvency Act 1986 it is the duty of the nominee to report to court on whether in his opinion a meeting of creditors should be summoned to consider the debtor's proposal. The clear implication is that as nominee you will consider the proposal, and make such enquiries as you consider necessary to satisfy yourself that the proposal ought to be put to creditors. For instance, the nominee’s right of access, under Rule 5.9 (3), to the debtor’s accounts and records, is there to be exercised, and was provided for that purpose. Case law has reinforced this view, i.e. that the nominee must go further than merely ensuring that the proposal contains the matters required by the legislation. In Re a debtor (No 222 of 1990) it was held that a nominee in making his report to court, and acting as chairman of the meeting of creditors has a duty (arising from section 256) to exercise a professional independent judgement. That this judgement is required of an authorised insolvency practitioner, emphasises that the court requires a report from a qualified person, skilled and experienced, who is exercising his professional judgement as to whether the matter is, in his opinion, fit to go forward for consideration by the creditors. In relation to each and every arrangement the Service would ask practitioners to consider the following:
(First published in Dear IP no. 33. March 1995) 2. Failed Individual Voluntary Arrangements (IVA's) Monitoring by the Service has highlighted the difficulty faced by some supervisors when an arrangement has failed. In several instances the proposal has failed but no further action has been taken to resolve the matter. The set functions undertaken by the supervisor under the proposal should include any actions he is to take should the arrangement be deemed to have failed. The Service is aware that the scope for action when an arrangement fails can be limited by lack of funds. However, in Re a debtor (No 222 of 1990) No 2, it was held that a supervisor must take some positive action if it appears that an arrangement is failing, either in accordance with the provisions of the proposal, or, where there are no such provisions, by seeking directions from the court, or petitioning for a bankruptcy order. Monitoring has also revealed that not all practitioners are aware of their duty to notify the Secretary of State when an arrangement has failed. When notifying the Secretary of State it would be appreciated if you could indicate what further actions you intend to take as supervisor, e.g. in respect of petitioning for bankruptcy. (First published in Dear IP no. 33, March 1995) 3. IVAs - Notices to the Official Receiver and the Secretary of State (First published in Dear IP no. 30, March 1994) Article Withdrawn December 2006 4. Modification of Court Jurisdiction It has been drawn to our attention that it is becoming increasingly common for terms to be inserted in proposals for individual voluntary arrangements which seek to exclude or vary the jurisdiction of the Court. Practitioners are reminded that any conditions seeking to exclude or vary jurisdiction will be void as being contrary to public policy, and accordingly should not be included in proposals. (First published in Dear IP no. 34, October 1995) 5. Notification to Secretary of State Regarding IVAs (First published in Dear IP no. 34, October 1995) Article Withdrawn December 2006 6. Position of Preferential Creditors Practitioners are reminded that section 4(4) and 258(5) of the Insolvency Act 1986, provide that a meeting of creditors may not approve a proposal or modification which affects the rights of a preferential creditor without the approval of that preferential creditor. HM Customs and Excise has informed the Service that in an increasing number of cases the proposal approved by creditors purports to affect Customs rights as preferential creditor, without approval, Customs will consider making an application to court, and reporting the matter to the practitioners authorising body, where the provisions of these sections have not been observed. (First published in Dear IP no. 24, November 1992) 7. Receipts of Funds by Trustees Prior to an IVA Where an individual voluntary arrangement (IVA) is proposed following the appointment of a trustee in bankruptcy, the trustee, acting as such, is still required to pay the proceeds of asset realisation into the ISA under Regulation 20 of the Insolvency Regulations 1994. These proceeds will attract the Secretary of State fee, which will not be rebated when the bankruptcy is subsequently replaced by an IVA. Practitioners will wish to bear this in mind when formulating proposals for an IVA. (First published in Dear IP no. 35, April 1996) 8. Individual Voluntary Arrangements following a Bankruptcy Order – Discharge of Official Receiver’s Costs – Rule 5.21 of The Insolvency Rules 1986 In bankruptcy cases where an individual voluntary arrangement (IVA) is subsequently approved, Rule 5.21 of The Insolvency Rules 1986 provides that the supervisor must either discharge any balance due to the OR in respect of fees, costs, charges and expenses properly incurred, or give the OR a written undertaking to discharge any such debit balances out of the first realisation of assets. Generally, no provision is made in the bankrupt’s proposal to creditors for the discharge of the OR’s costs as there is no mandatory requirement to do so under Rule 5.3, nor is it covered by current best practice guidance. Nonetheless, IPs are requested to consider including such provisions in any proposal prepared on behalf of a bankrupt, given the statutory requirement to discharge the OR’s costs. IPs should also be aware that Insolvency Practitioner Compliance Unit have responsibility for recovery of the OR’s costs from the supervisor in cases where the bankruptcy order is annulled following the approval of the IVA. Contact: Jane Knight, Insolvency Practitioners Control Unit, 5th Floor, Ladywood House, 45/46 Stephenson Street, Birmingham B2 4UZ. Tel: 0121 698 4098 (First published in Dear IP no. 46, July 1999) 9. Individual Insolvency Register - request for searches (First published in Dear IP no. 47, October 1999)Article Withdrawn December 2006 10. Individual Voluntary Arrangements – Reports of the Creditors Meeting to the Court and the Secretary of State in compliance with Rules 5.22 and 5.24 of the Insolvency Rules 1986 (First published in Dear IP no. 34, October 1995) Article Withdrawn December 2006 11.
Individual Voluntary
Arrangements – reports of the creditors’ meeting to the Secretary of
State in accordance with rule 5.24 of the Insolvency Rules 1986. Article Withdrawn December 2006 12.
Individual Voluntary Arrangements – notification of the completion or
termination of the arrangement to the Secretary of State as required by
rule 5.29 of the Insolvency Rules 1986 (as amended). Article Withdrawn December 2006 13. CVA VOTING PROCEDURE – RULE 1.19, REQUISITE MAJORITIES (CREDITORS) An issue has arisen regarding the
application of rule 1.19(4) of the Insolvency Rules 1986 rendering a
resolution invalid at a meeting of creditors in a CVA.
Rule 1.19(4) states that “any resolution is invalid if those
voting against it include more than half in value of the creditors,
counting in these latter only those – a)
to whom notice of the meeting was sent; b)
whose votes are not to be left out of account under [
rule1.19(3)]; and c)
who are not, to the best of the chairman’s belief, persons connected
with the company.” The point at issue is the meaning
of “creditors” in the context of the phrase “more than half in value
of the creditors”. Our view
is that the reference to rule 1.19(3) implies that the creditors for the
purpose of the calculation are:(a)
unsecured; (b)
have been given notice of the meeting; (c)
have given written notice of their claim to the chairman, and
(d)
he/she does not believe them to be connected with the company. Enquiries arising from the above
should be addressed to Gareth Limb, Insolvency Practitioners Compliance
Unit, The Insolvency Service, 5th Floor, 45 Stephenson Street,
Birmingham, B2 4UZ. Tel: 0121 698 4105. e-mail: gareth.limb@insolvency.gov.uk. 14.
INDIVIDUAL VOLUNTARY ARRANGEMENTS
–
Registration of an arrangement with the Secretary of State as required
by rule 5.24, 5.25 and 5.29 of the Insolvency Rules 1986 (as amended). Article Withdrawn December 2006 15.
Advertising of Individual Voluntary Arrangements The
Insolvency Service has received a number of enquiries recently regarding
the advertising of Individual Voluntary Arrangements (IVAs).
The enquiries have originated from individuals who entered into an
IVA and who were under the impression that the IVA would not be
advertised. The
IVA information held by the Insolvency Service is a public record and is
currently available for public inspection, by way of either a written
request or in person at an Official Receiver’s office. Whilst
there is no statutory provision for the advertisement of IVAs, the present
position of the Insolvency Service is to provide information from the IVA
register direct to three credit organisations.
The list of names are added to the credit organisations’
databases, and made available to their members, which include banks and
lenders. Information is not
made available to the general public, but individuals can request details
that are held about themselves. 16. Registration of Individual Voluntary Arrangements (IVAs) Article Withdrawn December 2006 Enterprise
Act (Individual Insolvency Provisions) 17.
Fast Track Individual Voluntary Arrangements 1.
A new fast track Individual Voluntary Arrangement (IVA) procedure is
introduced, where the debtor is an undischarged bankrupt and the official
receiver acts as nominee. The intention is to provide a quicker and more affordable
procedure for straightforward cases, and for this reason creditors will
not be able to make modifications to a proposal, and voting as to whether
to accept or reject it will be on paper. 2. If creditors approve an IVA where the debtor is an
undischarged bankrupt, then the court must annul the bankruptcy order on
an application by the debtor or the official receiver. This is designed to
avoid uncertainty in cases where the bankrupt makes no application for
annulment. 3. There will be transitional provisions, which will cover existing first and second-time bankrupts, and the family home provisions for existing cases. The details are shown at the relevant point of the guidance notes. 4. The main changes to the revised and expanded Part 5 of the rules are:
5. Annulment Following Approval of IVA Proposal The
rules governing the procedure for annulment of a bankruptcy order
following approval for an IVA have now been placed more logically within
Part 5. The provisions under
rules 6.212A to 6.214 are amended to remove reference to applications on
these grounds. The expanded Part 5 rules cover annulments made:
In all of the above, provision is made for vacation of the register of writs and orders, for substituting a representative for a deceased bankrupt where applicable and for the trustee’s release following annulment (rules 5.60 to 5.61).
Enquiries arising from the above should be addressed to Steve Quick, Director of Policy. Tel: 020 7291 6747.
The EC Provisions are moved without amendment to Chapter 12 (rules 5.62 to 5.65). The addition of paragraph (4) to rule 6.83 is made to
disapply meetings requisitions to fast track voluntary arrangements. Enquiries
arising from the above should be addressed to Steve Quick, Director of
Policy. Tel: 020 7291 6747. 19.
Individual Voluntary Arrangements – Termination Article Withdrawn December 2006 20.
Company Voluntary Arrangement (CVA) Moratorium Procedure As
from 30 January 2004 more companies were eligible for the CVA moratorium
procedure. One
of the qualifying conditions for eligibility for a moratorium under
Schedule A1 to the Insolvency Act 1986 (see paragraph 3(2) of the
schedule) is that the company must satisfy two or more of the requirements
for being a small company specified for the time being in
section 247(3) of the Companies Act 1985 (as amended).
As the financial limits in section 247(3) have recently been
changed, those new levels will automatically apply where the directors of
a company wish to obtain a CVA moratorium on or after
30 January 2004. The
new limits are:
The
changes were brought about by the Companies Act 1985 (Accounts of Small
and Medium-Sized Enterprises and Audit Exemption) (Amendment) Regulations
2004 (SI 2004/16). Any enquiries arising from this article should be directed to Richard Favier, Tel: 0207 637 6421 21. Review Of The Individual Voluntary
Arrangement Process On 19 July 2004, the
Insolvency Service hosted a forum to discuss Individual Voluntary
Arrangements (IVAs) attended by a wide range of stakeholders. From the opinions expressed at the forum, there appears to be
a consensus that a re-examination of the individual voluntary arrangement
process is overdue, particularly in the case of so called “consumer”
debtors. The forum was very
useful for generating a general debate on IVAs but such an approach is too
cumbersome for more comprehensive examination of the relevant issues. Therefore the Insolvency Service has set up a smaller working
group, representing a wide range of stakeholders, to examine in detail the
possible reform of the IVA process. The working group met for the first
time on 21 September 2004 and the members are: John
Fairhurst of Payplan Andrew
Redmond of Debt Free Direct Peter
Hughes Holland of Numerica Charles
Howson of Accuma Beverley
Budsworth of Budsworth & Co Pat
Boyden of PWC Steve
Treharne of KPMG Charles
Rusbasan of Max Recovery Ltd Euan
McPherson of HBOS Nick
Pearson of Advice UK Jan
Smith of CCCS The
Insolvency Service would be pleased to receive views or comments on the
IVA process to assist with the review.
Any such comments should be directed to Tracy Stanhope (contact
details below). Any enquiries arising from this
article may be directed to Tracy Stanhope, Section Head, Policy Unit, PO
Box 203, 21 Bloomsbury Street, London
WC1B 3SS;telephone: 020 729 6734; email: Tracy.Stanhope@insolvency.gov.uk 22. New Procedure
for Acknowledgement of IVA Submissions Practitioners
are aware that the Insolvency Practitioner Unit based at Ladywood House,
45/46 Stephenson Street, Birmingham, B2 4UZ, has the Secretary of State’s
delegated responsibility as Registrar of Individual Voluntary Arrangements
(IVAs). In
view of the increasing numbers of IVA registrations received from
Practitioners, the Unit will in future provide a schedule to Practitioners
at the beginning of the month listing the IVAs received from them for
registration in the previous month. This
is a change from the arrangement hitherto of acknowledging each IVA
submission individually on receipt. The
new procedure will begin in January 2005. Any enquiries arising from this article should be directed towards Joe Clogan, Head of Insolvency Practitioner Unit, 5th Floor, Ladywood House, 45/46 Stephenson Street, Birmingham B2 4UZ; telephone 0121 698 4105; e-mail: IPU.Email@insolvency.gov.uk NB Article 24 replaces that issued in March 2005 which is now withdrawn; for ease of reference the whole page has been re-issued. 23. IVA Submissions Insolvency practitioners are aware that the Insolvency Practitioner Unit based at Ladywood House, 45/46 Stephenson Street, Birmingham, B2 4UZ has the Secretary of State’s delegated responsibility as Registrar of Individual Voluntary Arrangements (IVAs). Part of that responsibility is to ensure the IVA Register is kept up to date. A recent review of the Register has shown that it is not accurate. There have been instances where arrangements have failed or completed without the Unit being advised, some arrangements remaining on the Register for over 10 years. In order to bring the Register up to date, insolvency practitioners are requested, as a priority, to update their own lists, and advise the Unit accordingly. Additionally, there have been instances where the Unit has removed an arrangement from the Register following receipt of a Certificate of Non-Compliance or notice that a debtor is in default, to subsequently receive confirmation from the insolvency practitioner that the IVA has completed or is continuing and should be restored. Insolvency practitioners are reminded of the guidance given in Issue 17 of Dear IP, that it is the responsibility of the Supervisor, or indeed the debtor or a creditor, to apply to Court for a decision that the notice was incorrectly filed and that the arrangement continues. Any enquiries regarding the above should be directed towards Joe Clogan Insolvency Practitioner Unit, 5th West Ladywood House,45/6 Stephenson Street, Birmingham B2 4UZ; telephone: 0121 698 4105 email: Joe.Clogan@insolvency.gov.uk 24. IVA Registration Insolvency practitioners will be aware that in accordance with the Amendment Rules, Individual Voluntary Arrangements will in future include details of the debtor’s gender, date of birth and any name by which the debtor was known, not being the name in which they entered the IVA. Insolvency Practitioner Unit is issuing a new form, which will standardise Individual Voluntary Arrangement (IVA) registration and incorporate new legislative changes. Insolvency practitioners should note that it is not necessary to enclose a copy of the proposal when registering the IVA. To expedite registration and to prevent the need for further referral, insolvency practitioners are requested to complete all available boxes including gender, and aliases, if any, together with their insolvency practitioner number. The new form is available as an attachment to this article and should be used with immediate effect. Termination Pursuant to Rule 5.34(3) insolvency practitioners are required to send to the Secretary of State a notice that the arrangement has been fully implemented or (as the case may be) terminated. Supervisors are reminded that legal advice was sought on termination and the guidance to be followed is given in article 19 of this chapter which provides the Secretary of State will remove an arrangement from the Register only on receipt of a specific notice of completion or termination and will disregard any notices referring to non- compliance or default by the debtor. For the avoidance of doubt, the Unit will remove an arrangement only on receipt of a notice from the practitioner that includes a reference to Rule 5.34(3). Any enquiries regarding the above should be directed towards Joe Clogan Insolvency Practitioner Unit, 5th West Ladywood House,45/6 Stephenson Street, Birmingham B2 4UZ; telephone: 0121 698 4105 email: Joe.Clogan@insolvency.gov.uk
25. Review of the
Individual Voluntary Arrangement Process In
Issue 20 of Dear IP (and the cover of Issue 22), subscribers were
informed of the setting up of a stakeholder working group to examine, in
detail, the possible reform of the IVA process. The
working group has since met on five occasions and its report, summarising
its findings, conclusions and recommendations on improving IVAs was issued
in July. The report and response form (to be returned by 7
October 2005) can be accessed on http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/con_doc_register/liveindex.htm Any enquiries regarding the above
should be directed towards Andy Woodhead, Policy Unit, 21 Bloomsbury
Street, London WC1B 3SS, telephone: 020 7291 6738 email: Andy.Woodhead
@insolvency.gov.uk 26. IVA registration, completion or failure As many of you will know, at the
end of January 2005 the Service embarked on a major data cleansing
exercise. This was to check the status of old IVAs on the Electronic
Individual Insolvency Register (E.IIR). This is now completed and with
your help we have removed some 2640 of the 3400. As a result The
Insolvency Service is now able to provide an accurate public register and
therefore, I would like to take this opportunity to thank all of you that
either personally or with the help of your staff gave my colleague Anne
Crabbe the information we needed to clear the cases. In order to safeguard the future
integrity of the information held on the E.IIR, the Insolvency
Practitioner Unit has increased resources to introduce the role of IVA
Registrar. The Registrar will operate an ongoing system of IVA
verification by providing Practitioners periodically with lists of
arrangements over a certain age and seeking confirmation of their current
status. In addition the Unit has revised
its IVA registration, completion and failure process. In future, incomplete applications will be returned to the
Practitioner with an appropriate explanation without being registered. Similarly, a notice of IVA
termination/completion that does not include a reference to the
appropriate Rule will be returned without action.
Instances of registration
applications more than ten days after the filing of the Chairman’s
report to Court or notices of completion or termination notified more than
28 days after the event will be referred, following notice, directly to
the Practitioner’s RPB. Against a background of increasing
IVA registrations the Unit is experiencing particularly high volumes of
multiple registrations from individual Practitioners. Traditionally each
registration is accompanied by a cheque for the appropriate amount (£35)
together with a copy of the Unit’s standard registration form providing
the necessary information. In
order to maintain the Unit’s 24 hour registration service, Practitioners
submitting multiple registrations are required in future to provide the
requisite information on one document, for example by way of a spreadsheet
format to include all the information required on the registration form,
together with a composite cheque for the total value of registrations.
Any enquiries regarding the above
should be directed to Joe Clogan at Insolvency Practitioner Unit Ladywood
House, 45-46 Stephenson Street, Birmingham, B2 4UZ email: joe.cloganl@insolvency.gov.uk 27. Review of the Individual Voluntary Arrangement Process Article Withdrawn December
2006 28.
Review of the Individual Voluntary Arrangement Process In
Issue 25 of Dear IP, subscribers were informed of the closing date for
responses to the stakeholder working group report “ Improving Individual Voluntary Arrangements”. Those
responses have now been analysed and a summary of those responses along
with the Government Reply has been placed on our web site and can be
accessed on the following link http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/con_doc_register/registerindex.htm 29. Authorisation
of Voluntary Arrangement nominees and supervisors Section 389A of the Insolvency Act 1986 (which was added by the Insolvency Act 2000) allows the Secretary of State to recognise bodies to authorise their members to act as office-holder in Voluntary Arrangements. Applications for recognition have recently been received from the IPA and the ICAEW and these are being processed. If the applications are successful it is likely that members (who may not be insolvency practitioners) of those bodies who are fit and proper persons to act as nominee and supervisor and who meet acceptable requirements as to education and practical experience and training may take appointments as Voluntary Arrangement Practitioners in 2007. 30.
Joint or interlocking Individual Voluntary Arrangements The
Secretary of State has become aware that insolvency practitioners have
been setting up joint, or inter-locking individual voluntary arrangements
(“IVA”) for consumer debtors (typically a husband and wife) where some
or all of the debts are joint debts of the parties, and where one monthly
payment is made under the terms of the proposal towards the payment of
their debts. Legal advice has
been sought on whether it is possible in law to have a joint IVA, and
whether IVAs approved by a joint resolution of both sets of creditors are
valid. Joint IVAs The
presumption of the law is that unless expressly prohibited, or prohibited
by necessary implication, a proposal for an arrangement can include any
terms. The onus is on the creditors to determine whether the terms of the
arrangement offer them a better return than the bankruptcy of the debtor.
Safeguards are built into the Act to ensure that those who consider that
they are suffering unfair prejudice may challenge an arrangement.
Any arrangement that does not provide for equal treatment runs the
risk of challenge, but is not per se invalid. The
view of the Secretary of State is that Individual Voluntary Arrangements
are just that, and that there is no provision within insolvency
legislation for joint IVAs. This
note does not address the situation of partnerships which are covered by
the Insolvent Partnerships Order 1994. Where there is a proposal that
purports to be a joint arrangement it is in fact likely to be regarded in
law as two separate arrangements. Accordingly,
the Secretary of State considers that where two linked consumer debtors,
such as a husband and wife, are considering setting up IVAs, the following
points should be borne in mind:
o
If a joint monthly
contribution is to be received from both debtors, the proposals should
make it clear how that contribution is to be split between the two
debtors. o
If each Voluntary
Arrangement is to be dependent upon the success of the other, this should
be made clear within the proposals, and the effect of failure of one IVA
on the other must be clear. o
The estimated outcome
statement should only contain information relating to that debtor – i.e.
it should not include debts or assets that belong to the other party. o
The proposals should be
clear on how dividend payments will be calculated, and how this will
affect each individual class of creditor.
Existing IVAs In
respect of existing arrangements (whether still current or now closed)
where there has been a joint resolution of creditors, and there have been
payments under the arrangements to creditors, and everyone has acted on
the basis that the arrangement is valid, it is the Secretary of State’s
view that it is unlikely that a court would overturn such arrangements.
In coming to this view the Secretary of State has taken cognisance
of the following:
As part of The Service’s ongoing evaluation function, we would be grateful to receive written representations from any stakeholders who feel that there would be real benefits to debtors and creditors if the law were to be amended to make specific provision for joint IVAs. Any representations made should set out reasons and, where possible, provide examples of potential benefits. Representations can be forwarded to Mike Norris, Director of Policy at mike.norris@insolvency.gov.uk Any
enquiries regarding this article should be directed towards Catherine
Collinson telephone: 0121 698 4098 email:
Catherine.collinson@insolvency.gov.uk 31.
Review of the Individual Voluntary Arrangement Process In
article 28 of this chapter (Dear IP March 2006 no.26), insolvency
practitioners were informed that a summary of responses to the
consultation document, “Improving Individual Voluntary Arrangements”,
with the Government Reply, had been published.
Insolvency
practitioners should note that on 8 May 2007 the latest proposals for
change were published in “A consultation document on proposed changes
to the Individual Voluntary Arrangement (IVA) regime contained in the
Insolvency Act 1986 and associated matters”. The closing date for
responses to the consultation is 3 August 2007 and both documents can be
accessed here. Any enquiries regarding this article should be directed towards Maria Isanzu, Policy Unit, Area 5.7, 21 Bloomsbury Street, London WC1B 3QW; telephone: 020 7291 6761 email: maria.isanzu@insolvency.gov.uk 32.
The IVA Forum and Plenary Session On 17
January 2007 The Insolvency Service and the British Bankers Association (BBA)
co-hosted a forum on Individual Voluntary Arrangements (IVAs) attended by
representatives from creditors, IVA providers, debt advisers and
regulators. The forum resulted in four working groups of interested
parties being set up to examine key aspects of the IVA process, including:
·
The treatment of the debtor’s
income and expenditure ·
The treatment of the debtor’s
home ·
Advertising IVAs and
information to be provided to the debtor when seeking debt advice ·
Due diligence and fees ·
A suggested standard IVA
proposal and terms and conditions Each of the working groups issued a report, which
were discussed at a Plenary Session of the IVA Forum on 31 May 2007 where
there was an opportunity for further comments to be made and views
expressed. One of the
principal objectives of the Forum was to finalise a protocol, initially
drafted by the BBA. This protocol will be
applicable to “straight-forward, consumer-based IVAs”, the
conditions of which include:- ·
The necessity for the debtor
to have a regular income ·
The need for there to be 3
or more lines of credit, and 2 or more creditors ·
Home equity: suitable for
homeowners and non-homeowners ·
No age constraints and no
minimum or maximum thresholds Although
adherence to the protocol will be voluntary, it will be based on trust and
goodwill among all parties to ensure compliance. Copies of
the latest draft of the protocol can be obtained from Andy Woodhead at the
email address below or from The Insolvency Service website. An “IVA
Standing Committee”, chaired by The Insolvency Service, will be set up
to act as a forum for stakeholders to discuss the IVA process in the long
term. However, in the short
term it will be the vehicle for finalising the protocol, the standard
terms and conditions and the standard IVA proposal and considering how
best to take forward the provision of market information on IVAs. Once the IVA
Standing Committee has a finalised version of the documents then they will
be placed on The Insolvency Service website, with a short opportunity
for further comment. The
constitution of the IVA Standing Committee is currently being considered. ·
Given the broad agreement on
many issues the Plenary Session concluded by agreeing an action plan which
sets out a number of key target dates for progression or completion of the
recommendations. The
working group reports, notes of the 31 May Forum, the draft BBA standard
IVA protocol and progress on various IVA issues can be accessed here. 33.
New e-mail registration facility Following
the recent introduction of a new system of registering Individual
Voluntary Arrangements, many practitioners will be aware that the
Insolvency Practitioner Unit now has the facility to automatically upload
lists of IVA registrations submitted by email.
The new system will enable IPU to maintain its present service of
registering arrangements within 24 hours of receipt of the appropriate
fee. Success of the new
system relies on practitioners and their cashiers using a strictly
formatted spreadsheet that is now available on the insolvency practitioner’s
area of The Insolvency Service’s internet site and includes instructions
on how it is to be completed. Practitioners will be able to access the
spreadsheet under the heading “Insolvency Profession & Legislation“
using further links to “Information for and about Insolvency
Practitioners” and “Non-statutory forms”.
Please complete the spreadsheet for one or any number of
registrations and send to: IVA.Remittance@insolvency.gov.uk
Any
enquiries regarding this article should be directed towards Joe Clogan
telephone 0121 698 4105; email joe.clogan@insolvency.gov.uk
General enquiries may be addressed to e-mail IVA.Remittance@insolvency.gov.uk; telephone 0121 698 4102 34.
IVA Forum – straightforward consumer IVA protocol Individual Voluntary Arrangements (IVAs) were
introduced in 1986 as an alternative to bankruptcy. They were originally aimed at individuals with complex
affairs, for example professional persons or traders.
Since their introduction, the credit market has expanded
significantly and currently they are mainly used by people with much
simpler financial affairs. In
the consultation document “Improving IVAs” (see Article 28 of this
Chapter for further information), a stakeholder working group suggested
that the IVA regime could be improved by a number of best practice
methods. That suggestion has
resulted in the straightforward consumer IVA protocol.
The aim has been to achieve this using a standard framework,
providing a balance between the needs of the debtor for some form of debt
resolution and the rights of the creditors.
A
forum was held on the 29 January 2008 at the ICAEW’s Great Hall, and was
attended by 180 delegates. The purpose of the forum was to present a final
version of the protocol (and supporting documents) to stakeholders.
There was overwhelming support for the protocol and it was agreed
that it should be adopted with effect from
1 February 2008. The protocol is essentially a
voluntary code of conduct for those organisations and bodies involved in
managing and agreeing IVAs. It should provide greater
transparency for creditors and debtors alike by using standard clauses and
a consistent format. The
presentation to delegates at the forum, a full copy of the protocol and
associated documents and how the protocol will be reviewed can be found on
the Insolvency Service website: Any enquiries regarding the above
should be directed to Stephen Parcej, Policy Unit, Area 5.7, 21 Bloomsbury
Street, London, WC1B 3QW; telephone: 020 7637 6761, email: Stephen.Parcej@insolvency.gov.uk General enquiries may be directed
to Policy.Unit@insolvency.gov.uk
Telephone: 0207 291 6740 35.
Interim Order prior to
proposal of voluntary arrangement – error in Statutory Form 5.2 It has been
drawn to our attention that the wording of the second substantive
paragraph of Form 5.2 (Interim Order of court under section 252 of the
Insolvency Act 1986) does not properly reflect the wording of section
255(6) of the Insolvency Act 1986. Section 255(6) states that an
interim order ceases to have effect at the end of the period of 14
days, beginning with the day after the making of the order. The form states that the order has
effect for XXX days beginning with the day after the date of the
Interim Order. The wording of Form 5.2 is wrong.
The Interim Order takes effect from the date it is made and not the
day after, as the form suggests. We will be seeking to correct the wording
of the form when Part 5 of the Insolvency Rules is next amended, which
will be October 2008 if possible and
if not then April 2009. Any enquiries regarding this
article should be directed towards General enquiries may be directed
to Policy.unit@insolvency.gov.uk; Telephone: 0207
291 6740 36.
Company Voluntary Arrangement (CVA) moratorium: changes to Companies
Act 2006 “small” companies definition Section 382 of the Companies Act
2006, which sets out the conditions that a company must satisfy to qualify
as “small”, have been amended with effect from 6 April 2008. Schedule
A1 to the Insolvency Act 1986 has also been amended, with effect from the
same day, to remove references to section 247 of the Companies Act 1985
and insert references to section 382 of the Companies Act 2006. A company now qualifies as small
in a year in which it satisfies two or more of the following requirements: 1. Turnover
Not more than £6.5 million Following the amendment to
schedule A1 to the Insolvency Act 1986, the criteria allowing a company to
enter into a moratorium under section 1A of the Act now reflect the new
requirements for qualification as a small company set out above. Any enquiries regarding this
article should be directed towards Andrew Shore, IP Policy Section, Area
5.7, 21 Bloomsbury Street, London, WC1B 3QW; telephone: 020 7291
6769; email: andrew.shore@insolvency.gov.uk General enquiries may be directed
to IPPolicy.Section@insolvency.gov.uk;
Telephone: 020 7291 6772 37. Future publication of completion/failure rates of Individual Voluntary Arrangements (IVAs) The Insolvency Service has accepted a recommendation contained within the Insolvency Practices Council Annual Report 2007 to publish annual statistics showing aggregate completion/failure rates of IVAs set up in each of the previous five years. Publication of this data will commence in early 2009, under the statistics section of The Insolvency Service’s website. Any enquiries arising from this article may be directed to Steve Lamb, of IP Policy Section, Area 5.6, 21 Bloomsbury Street, London WC1B 3QW; telephone: 020 7637 6698; e‑mail: steve.lamb@insolvency.gov.uk General enquiries may be directed to IPPolicy.Section@insolvency.gov.uk; Telephone: 020 7291 6772 38. Registration of individual voluntary arrangements Rule 5.29(1) of the Insolvency Rules 1986 sets out the reporting requirements for individual voluntary arrangements (“IVAs”). The rule requires that immediately after the chairman of a creditors’ meeting has filed in court a report that the meeting has approved an IVA, he/she shall report details of the arrangement to the Secretary of State. This is necessary to enable the Secretary of State to maintain the public register of IVAs. An IVA cannot be registered without the requisite registration fee, currently £10. The Insolvency Practitioner Unit of the Insolvency Service considers 14 days after court approval an appropriate period in which practitioners should register an IVA and submit the £10 registration fee, and would therefore ask that insolvency practitioners seek to adhere to this period. Any IVAs registered 14 days after court approval will be considered late, and instances of persistent late registrations will be referred to the relevant insolvency practitioner’s authorising body. Any enquiries regarding this article should be directed towards Joe Clogan at Insolvency Practitioner Unit, Fourth floor, Cannon House, 18 Priory Queensway, Birmingham, B4 6BS; email: joe.clogan@insolvency.gov.uk General enquiries may be directed to: IPU@insolvency.gov.uk 39. Review of the IVA Protocol The Insolvency Service is carrying out a review of the operation of the IVA Protocol and plans to report its findings by the end of the year. The review is being carried out in conjunction with the IVA Standing Committee, including representatives from R3, ICAEW, IPA and IPC, as well as insolvency practitioners and other industry representatives. It is important that The Insolvency Service has as much accurate information as possible in order to fully evaluate the operation of the Protocol to date. Insolvency Practitioners are therefore requested to respond positively and promptly to any requests for IVA data and related information which they may receive from The Insolvency Service. We appreciate your assistance in making this review work, which we believe to be in the interests of the whole insolvency community. Any enquiries regarding the above should be directed towards Karol Sanderson, Policy Unit, 3rd Floor, 21 Bloomsbury Street, London WC1B 3QW; e-mail: Karol.Sanderson@insolvency.gov.uk General enquiries may be directed to Policy.unit@insolvency.gov.uk; Telephone: 020 7291 6740 40.Individual Voluntary Arrangements (IVAs) - Outcome Statistics New Official Statistics showing the outcome status for IVAs registered in England and Wales each year from 1987 until 2008 were published by The Insolvency Service on 4 December 2009. These report numbers and percentages of IVAs that have completed their term; have failed; or are still ongoing. The publication of these statistics implements a recommendation made by the Insolvency Practices Council. These statistics can be accessed via the statistics section of The Service’s website, at the link below:- http://www.insolvency.gov.uk/otherinformation/statistics/IVAs/ivas.htm
Any enquiries regarding this article
should be directed towards General enquiries may be directed to IPPolicy.Section@insolvency.gov.uk Telephone: 020 7291 6772 41. Rule 5.24(4) of the Insolvency Rules 1986 (Proceedings to obtain agreement on IVA proposal) Rule 5.24(4) of the Insolvency Rules 1986 requires the chairman of a meeting of creditors in an IVA to give notice to the court where a meeting to approve the debtor’s proposals has been adjourned. In consequence of the amendments made to the Insolvency Rules 1986 by the Legislative Reform (Insolvency) (Miscellaneous Provisions) Order 2010 (2010 No 18), a non-interim order IVA is unlikely to have had any court input by the date of the creditors meeting. Some commentators have questioned whether Rule 5.24(4) need be complied with in those cases. The Insolvency Service will consider at the next available opportunity as to whether amendments should be made to Rule 5.24(4) in order to remove the filing requirement in non-Interim Order cases. In the meantime, Rule 5.24(4) imposes a statutory requirement on chairmen from which neither The Insolvency Service nor the Recognised Professional Bodies are able to release insolvency practitioners. Where a breach of Rule 5.24(4) occurs it is up to the regulatory body to consider the materiality of the breach and what action to take in respect of it. Any
enquiries regarding this article should be directed towards General enquiries may be directed to email: IPPolicy.Section@insolvency.gov.uk Telephone: 020 7291 6772 42. Operation of the IVA Regime Following the last meeting of the IVA Standing Committee, which meets to identify and discuss the operation of the IVA regime, a couple of issues were brought to light, which the meeting agreed should be brought to insolvency practitioners’ attention via Dear IP. The May 2010 Protocol Insolvency practitioners that offer standard consumer-based IVAs are reminded to use the up-to-date version of the Protocol, which should have been the version used since 1 May 2010 (link to 2010 Protocol). Not using this version results in creditors and/or their agents seeking modifications to the proposal that you have sent out, which are both costly and time-consuming, and which could be avoided. An overview of the changes that were agreed by the Standing Committee can be viewed here. Chairman’s Report following the meeting Under Rule 5.27 of the Insolvency Rules 1986 a copy of the Chairman’s report of the meeting – and whether or not the arrangement has been approved, with or without modifications – should be filed at court within four business days and as soon as reasonably practical thereafter sent to creditors (R5.27(4A)(a)); or if there is no court involvement it should be sent to creditors within four business days of the meeting (R5.27(4A)(b)). There was some concern expressed that some of these reports were taking considerably longer and may result in creditors taking recovery action which is both distressing for the debtor and expensive for the creditor. Insolvency practitioners are asked to ensure that reports are sent out to creditors as quickly as possible after the meeting and certainly within the time period in the Rules. Any enquiries regarding this article should be directed towards Sam Roberts, Policy Unit, 3rd Floor, 21 Bloomsbury Street, London, WC1B 3SS. Telephone: 020 7291 6822 email: Sam.Roberts@insolvency.gov.uk General enquiries may be directed to email Policy.Unit@insolvency.gov.uk Telephone: 020 7291 6740 43. Charging of VAT in Individual Voluntary Arrangements Insolvency Practitioners will no doubt be aware of the VAT Tribunal decision in the case of Paymex Ltd v HMRC, and the issues arising in respect of potential refund claims in IVA cases where VAT has been charged and paid over to HMRC. Questions have been posted to the Recognised Professional Bodies, R3 and those providing compliance services, about some of the points requiring clarification.
http://www.hmrc.gov.uk/briefs/vat/brief2711.htm Whilst we are not in a position to give definitive advice, we would remind practitioners of the following principles which should be taken into account when considering what action, if any, they may contemplate in respect of VAT previously charged and paid to HMRC:
1) Insolvency practitioners acting as
supervisors do so in accordance with basic trustee principles and therefore
they should act in the best interests of the beneficiaries of the estates in
respect of which they have been appointed. 2) Where an estate has suffered a charge for VAT, practitioners should carefully identify the appropriate recipient of any potential refund - ordinarily we would expect the estate to be the beneficiary of such a refund. HMRC may resist claims for a refund unless it is used to reimburse the estate that suffered the original charge for VAT. Insolvency practitioners considering lodging a claim for repayment will need to take advice as to whether they have the legal standing to claim a VAT refund in closed cases, having regard to the above principles. In addition, as indicated above, HMRC may resist claims for a refund of the tax charged and paid over by the practitioner unless such a refund was to be used to reimburse the party that suffered the original charge for VAT. Insolvency practitioners may also wish to consider whether they should lodge with HMRC a protective notice of their intention to claim refunds, with a view to fixing the claim period and potentially maximising recoveries. There may be some expectation amongst creditors and their representatives that practitioners should instigate claims, at least in open cases. We will be discussing the implications of the decision with HMRC and the Recognised Professional Bodies, and hope to be able to provide more definitive guidance on the issue in due course. General enquiries may be directed to email IPPolicy.Section@insolvency.gov.uk Telephone: 020 7 291 6772 44. Report of a creditors’ meeting Practitioners are reminded that pursuant to Rule 5.27(4A)(b) of the Insolvency Rules 1986, where there is no court involvement, the Chairman’s report of the meeting of creditors in an IVA should be sent out within 4 business days of the meeting. Concerns have been expressed that some of these reports were taking considerably longer and may result in creditors taking recovery action which is both distressing for the debtor and expensive for the creditor. Practitioners are asked to ensure that reports are sent out to creditors within the time period specified in the Rules. Any
enquiries regarding this article should be directed towards Sam Roberts,
Policy Unit, 3rd Floor, 21 Bloomsbury Street, London, WC1B 3SS. General enquiries may be directed to email Policy.Unit@insolvency.gov.uk Telephone: 020 7291 6740 45. HMRC Voluntary Arrangements Service (VAS) The VAS help sheet “working with insolvency practitioners”, has recently been updated. It reaffirms HMRC’s support for voluntary arrangements whilst making our expectations clearer. HMRC continue to receive an unprecedented level of VA proposals and to help them deliver an efficient and timely service and avoid costly re-working, could practitioners please ensure that all proposals in which HMRC is a creditor meet those expectations. The help sheet is available on the HMRC site via http://www.hmrc.gov.uk/helpsheets/vas-factsheet.pdf or by using the search term ‘VAS’ or ‘VAS helpsheet’. The help sheet is dated 11/11. Can practitioners please no longer use earlier, undated versions and could they also make sure that any staff who are involved in the preparation or submission of proposals are aware of the update. Could practitioners also remind staff that where HMRC is a creditor, all CVA proposals for England, Wales, Scotland and Northern Ireland must be sent to VAS at the address given below as must all IVA and PVA proposals for England, Wales and Northern Ireland. This applies no matter which HMRC office has previously dealt with the debtor’s tax affairs. HM
Revenue & Customs Any enquiries regarding this article should be directed towards Kevin Hatt at HMRC. Email: Kevin.Hatt@hmrc.gsi.gov.uk General enquiries may be directed to IPPolicy.Section@insolvency.gov.uk 46. Notice of the result of a creditor’s meeting Chapter 24, Article 44 issued in March 2012 reminded insolvency practitioners of the importance of sending out the notice of the result of a creditors’ meeting in an individual voluntary arrangement. Rule 5.27(4A)(b) of the Insolvency Rules 1986 is clear and states that where there is no court involvement, the report should be sent out within four business days of the meeting. It would appear that this is not happening in all cases and consequently some creditors are issuing routine modifications to an IVA proposal to replicate what the Rules already provide for. Any enquiries regarding this article should be directed towards Sam Roberts, Policy Unit, The Insolvency Service, 4 Abbey Orchard Street, London, SW1P 2HT, telephone: 020 72916822
General enquiries may be directed to email
Policy.Unit@insolvency.gov.uk 47. Electronic logging of claims The Voluntary Arrangement Service (VAS), on behalf of HMRC, is currently piloting the electronic lodgement of their claims by using WinZip e-mails. In certain cases, where the insolvency practitioner's e-mail address is known, they will receive an initial e-mail with an encrypted claim attached, followed by a second e-mail containing a password to open the encrypted claim. Each e-mail will carry a disclaimer notice together with the following message:- "The sender’s e-mail address is not to be used for general correspondence. If future contact in respect of this customer is necessary then please use the following address: eisw.vaas.hmrc.gsi.gov.uk” HMRC is governed by strict data security rules and only information that has been formally approved can be exchanged electronically. As HMRC is a creditor in a large number of voluntary arrangement proposals, the VAS will continue to respond to all other correspondence in the usual way. Any enquiries regarding this article should be directed towards Kevin Hatt of HMRC telephone: 01903 701 089 email: Kevin.hatt@hmrc.gsi.gov.uk 48. Update to the IVA Protocol for use on or after 2 January 2014 The IVA Standing Committee has taken the decision to update the Protocol and some associated documents. The revised Protocol is available here. The changes to the Protocol and the new equity clause are to ensure that the term ‘remortgage’ includes secured loan. A summary of changes to standard conditions are set out below: General consistency changes have been made throughout to make “you” rather than “individual” or “debtor” Section 1 · New paragraph “e” to give a definition to property · Other existing paragraphs renumbered · New paragraph “l” to give a definition to supervisor Section 2 · Updated wording for clarity Section 10 · Paragraph 10(3) updated to confirm that once uncashed dividends are paid to the debtor the creditor has no claim to these funds. Section 14 · Heading changed to assets and after acquired assets · New paragraph 14(1) to include an all assets clause · Other existing paragraphs renumbered Section 17 · Paragraph 17(3) updated to make it clearer that creditors should be entitled to catch up dividends · Paragraph 17(6) updated to refer to section 323 of the Insolvency Act and clearer wording · Footnote deleted as this referred to an earlier version of the protocol Section 26 & 27 · HMRC set off reworded at request of HMRC · Changed wording from non-trading to not self employed Any enquiries regarding this article should be directed towards Sam Roberts, telephone: 020 7291 6822 email: sam.roberts@insolvency.gov.uk 49. Individual Voluntary Arrangements – Rule 5.34 Estate Accounts and Insolvency Practitioner Services (EAIPS) has the Secretary of State’s delegated responsibility as Registrar of Individual Voluntary Arrangements (IVAs). Insolvency practitioners are aware that Part VIII of the Insolvency Act 1986 places an obligation on supervisors of IVAs to file a notice within 28 days of the completion or termination of the arrangement (Rule 5.34 of the Insolvency Rules 1986) as follows: 5.34(1) (Supervisor to send notice) Not more than 28 days after the completion or termination of the voluntary arrangement, the supervisor shall send to all creditors of the debtor who are bound by the arrangement, and to the debtor, a notice that the arrangement has been fully implemented, or (or as the case may be) terminated. 5.34(2) (Supervisor to send report) With the notice there shall be sent to each of those persons a copy of a report by the supervisor summarising all receipts and payments made by him in pursuance of the arrangement, and explaining any difference in the actual implementation of it as compared with the proposal as approved by the creditors’ meeting or (in the case of the termination of the arrangement) explaining the reasons why the arrangement has not been implemented in accordance with the proposal as approved by the creditors’ meeting. 5.34(3A) (Copy of notice and report) Within the period in paragraph (1) a copy of the notice under paragraph (1), together with a copy of the report under paragraph (2) must be – Sent by the supervisor to the Secretary of State We would be grateful if practitioners would send their completion and termination documents by post directly to EAIPS at, The Insolvency Service, Cannon House, Level 3, 18 Priory Queensway, Birmingham, B9 6FD. Any enquiries regarding the above should be directed towards Debbie Simpson, Estate Accounts & Insolvency Practitioner Services, Level 3, Cannon House, 18 Priory Queensway, Birmingham, B4 6FD; telephone: 0121 698 4110 email: EAIPS.closureandannulments@insolvency.gov.uk 50. IVA dividend payments to HMRC Voluntary Arrangements Service (VAS) With the ever increasing number of individual voluntary arrangements (IVAs) VAS has seen a four-fold increase in the number of dividend payments over the past six months. Many of these are for very small amounts and are barely cost effective to bank. This problem is worsened when neither cheques nor correspondence bear the VAS reference (beginning 880/…). Tracing the correct references and then dealing with these small sums ties up staff resource that could be better used dealing with your other enquiries. Could practitioners please therefore:
Any enquiries regarding this article should be directed towards Kevin Hatt, HM Revenue and Customs, telephone: 03000 520 075 email: kevin.hatt@hmrc.gsi.gov.uk 51. Mis-sold Payment Protection Insurance (PPI) and Individual Voluntary Arrangements (IVAs) Insolvency practitioners will be aware that claims for mis-sold PPI are impacting on the majority of IVAs. Guidance was issued to practitioners in 2014 to assist in dealing with PPI. Over 40% of complaints made to the Complaints Gateway relate to IVAs with the majority concerning issue relating to PPI claims and the impact they are having on the arrangement. This article is being issued to insolvency practitioners as a reminder of areas to consider when dealing with PPI claims. Completed cases A recent High Court decision (James Green v James Wright [2015] EWHC 993 (Ch)) may have an impact on how PPI refunds, and any other unrealised arrangement assets, are dealt with in completed cases. Following closure of an IVA, it was discovered that the individual had funds owing to him as a result of a PPI claim. The funds were paid to the former Supervisor as they were considered to be assets comprised within the IVA which should be utilised for the benefit of creditors. The Court was asked to consider the effect of the issuing of a completion certificate on the availability of a PPI claim to the arrangement. In this instance the Court ordered that the proceeds of the PPI claims were due and payable to the debtor, as the issuing of a completion statement had brought any continuing trust over them to an end. The clauses relating to the effect of issuing a completion statement in both the R3 and IVA Protocol Conditions are written in identical terms and state that the debtor shall be released from all debts which are subject to the arrangement. It was held in the judgement that there were no beneficiaries, given that creditors’ claims had been discharged, and therefore, there was no continuing trust. The funds would, therefore, be held on a bare trust for the debtor. In this case, the proposal was silent on whether a trust continued after completion of the arrangement and there was no express agreement reached with the debtor in advance of issuing the completion statement, as suggested by paragraph 4.2 of the PPI Guidance. Both the PPI Guidance and the absence of an express agreement were referred to by the Court in reaching its decision. This case is subject to an appeal at the Court of Appeal. Practitioners should note that the current PPI Guidance is under review and issues raised by this decision will be considered as part of that process once the appeal has been heard. In the meantime, where the intention is to realise assets after the conclusion of an arrangement, practitioners may wish to consider obtaining legal advice as to the precise terms of any agreement they propose to reach with a debtor, and the wording of the completion statement. Terminated cases Practitioners should be aware that they may encounter potential PPI claims in cases where the IVA has been terminated. Practitioners should in the first instance refer to the terms contained within the proposals or modifications as to whether there is an express provision that any trust does not survive termination. Practitioners may wish to consider obtaining legal advice when considering PPI claims in cases where the IVA has been terminated. If it is established that a claim can be made, the grounds and entitlement to claim should be drawn to the attention of the debtor. If it is established that there is no continuing trust, it will not be possible for practitioners to pursue the claim unless there is an express agreement with the debtor to do so. Communications One of the most common causes of complaint concerning IVAs is the breakdown of communications between the practitioner and the debtor and the delay in closing the arrangement due to ongoing PPI claims. Where it is necessary to undertake a PPI investigation practitioners should inform debtors at the earliest opportunity with a reference to the particular terms within the proposals or modifications deeming PPI as an asset of the arrangement and permitting the supervisor to carry out such investigations. Debtors should be informed of the likely timescale involved and the impact the investigations will have on the arrangement. Ordinarily practitioners would be expected to promptly close cases following the receipt of a debtor’s final payment having carried out a final review of the case and in line with the terms of the proposal and any modifications. However, it is recognised that due to the possible implications of the decision in the case of Green vs Wright, a prompt closure of the case may not always be practicable. During the period following the debtor’s final payment it is important that regular updates are provided to the debtor and any correspondence is responded to promptly. Where the intention is to realise assets after the conclusion of an arrangement, enabling a completion certificate to be issued, practitioners should ensure that debtors fully understand the terms of any agreement and that written consent is obtained from the debtor in advance. The Insolvency Service has previously asked the RPBs to open an investigation into any complaint where the delay in the closing an IVA exceeds six months following receipt of the debtors final repayment. These types of complaints will continue to be passed to the RPBs via the Complaints Gateway. This does not mean that there is an assumption that any misconduct has occurred. It will be for individual RPB to determine whether or not the delay was reasonable taking into account the circumstances of the case. Claims management Companies Where it is determined that it is appropriate to appoint a claims management company to pursue potential PPI claims, it is important that practitioners are satisfied that the procedures adopted by the claims company result in the debtor being treated in a fair and reasonable manner and that any investigations are carried out promptly. Practitioners should not however, under any circumstances, attempt to coerce debtors into dealing with any particular claims management company and should the debtor demonstrate that they can achieve a greater benefit to the estate by pursuing the claims themselves, they should not be prevented from doing so. Any expenses incurred by practitioners should not be borne by the debtor but should be treated as an expense of the realisation and should be appropriate, reasonable and commensurate reflections of the work necessarily and properly undertaken. Practitioners should disclose to creditors and debtors details of all expenses incurred when dealing with claims management companies together with an explanation of why it was necessary to carry out the work, why an external party was used and what financial benefit, if any, there will be for creditors. Where the office holder receives commission for the introduction of a debtor to a PPI mis-selling claims company this should be disclosed and treated as an asset of the estate in accordance with the Code of Ethics. Such commissions should only be accepted where there is a benefit to the estate and any such arrangements should be kept under regular review to ensure that they continues to represent the best available benefit to the estate. If there is any relationship between the practitioner and the claims management company, this must be disclosed. Case transfers Where an insolvency practitioner is appointed as a successor practitioner following a block transfer of cases ordered by the Court that includes cases that have previously been closed, it is not possible to carry out any PPI investigations on these cases as any rights under a continuing trust are personal to the office holder at the time of closing the case. Any enquiries regarding this article may be directed to email: IPRegulation.Section@insolvency.gov.uk Estate Accounts and Scanning (EAS) are responsible for maintaining the Individual Insolvency Register (IIR) on behalf of the Secretary of State. In January 2016, EAS will be issuing insolvency practitioners a report for them to review of the Individual Voluntary Arrangements (IVAs) where they are listed as the main supervisor and meet the following criteria:
The reports will be issued by email as a spreadsheet with a covering letter and will request that insolvency practitioners in the first instance reply within ten working days to acknowledge receipt. Where no acknowledgement is received, EAS may contact the relevant authorising body to ensure the correct contact details are being used. The covering letter will also ask insolvency practitioners to complete the review and advise EAS within four weeks of all the details of IVAs on the report that have ended or transferred to another supervisor. If practitioners are unable to respond within this timeframe please can they contact EAS with their acknowledgement to advise when the review is likely to be completed by. Any enquiries regarding this article should be directed towards EAS Customer Services. Telephone: 0121 698 4268 Email: CustomerServices.EAS@insolvency.gov.uk The IVA standing committee provides a medium for the Insolvency Service, insolvency practitioners, creditors, advice agencies, regulators and other interested parties to meet and discuss topical issues for IVAs. The IVA protocol has been working successfully since its introduction in 2008. The standing committee decided that a review of the protocol should be carried out in late 2015 and a sub-committee was formed. The changes were approved at a meeting of the committee in March and there have been some positive improvements that should give more flexibility for the efficient running of consumer IVAs. There is now increased flexibility for payment breaks and a simplification of the process to extend an IVA when required. The revised protocol is now live at: https://www.gov.uk/government/publications/individual-voluntary-arrangement-iva-protocol As with previous versions some time for the changes to imbed has been factored in and it is expected that practitioners should be using the new version by 1 October 2016. The changes which have been made are set out below for ease of reference. Any enquiries regarding this article should be directed towards Georgina Maskell telephone: 0207 291 6760 email: georgina.maskell@insolvency.gov.uk General enquiries may be directed to email: IPRegulation.section@insolvency.gov.uk There has been a general update on changing “debtor” to “consumer” and updated references to SIPS, FCA and booklets. 2.2 – Introduces reference to FCA. 2.6 – Definition of consumer 2.8, 2.9 & 2.10– Makes reference to vulnerable consumers and how they should be dealt with. 3.1 – More flexible wording on income sources. 3.2 – Adds caution for IVAs proposed for individuals on benefits. 3.7 – Consumers should be able to access a copy of the protocol. 4.2 – Simplified wording 4.3 – Updated reference to complaints 5.3 – IP has responsibility to ensure their lead generators follow the protocol. 6.1 – Every individual should be given advice (to ensure that both parties in an interlocking IVA are given full advice). 6.2 – Updated clarification of information to be provided on debt resolution options. 6.3 – Refers to considering areas to consider when giving advice. 7.2 Changed “material” to “significant” Changed heading to income and expenditure 7.4 acknowledges that payment of board is outside of the consumer’s control. Removed expenditure heading 7.5 Makes reference to any new standard financial statement and that the budget is likely to be sustainable and not cause undue hardship. 7.7 Can accept internet confirmation of council tax. 7.10 Where possible there should be a household budget. 9.2 The IVA term is automatically extended if there are extra payments in lieu of a re-mortgage. 9.3 Points to consider when net worth is released as a secured loan. 10.5 Non-payment of additional income (not just disclosure) is a breach and simplification of wording. 10.7 Non-payment of redundancy (not just disclosure) is a breach and simplification of wording. 10.8 Removal of 6 month payment break but more flexibility given in 9 emergency expenditure payments and clarification that the IVA can be extended by more than 12 months to recover sums due. (Note, should 12 months be insufficient there is still the opportunity to vary the terms if necessary) 13.5 Creditors should not put forward modifications that are already in the proposal. 14.3 creditors should follow guidelines if they are bound by them. Standard conditions 4(3) – Applies Act and Rules when IVA doesn’t give guidance Changes made to 5(2), (3) and (4) to allow flexibility in extending the arrangement and notification to creditors. 5(6) Non-payment of additional income (not just disclosure) is a breach and simplification of wording. 8(8) Removal of 6 month payment break but more flexibility given in 9 emergency expenditure payments and clarification that the IVA can be extended by more than 12 months to recover sums due. Old 10(3) removed and paragraphs renumbered 10(9) renamed 10(8) and simplified to follow the breach process. Renumbered 10(9) – 10(11) 11(2) Updated as the old paragraph 19.2 has been deleted. 14 (3) updated to clarify that there will be no statutory interest payable but the costs should be paid. 17(2) Do not require a claim form for debts of less than £1,000 to mirror changes expected in 2016 rules. 17(7), (8), (9) and (10) requirement to re-distribute unclaimed dividends to other creditors, clarifies what to do with unclaimed interim dividends and when to return funds to consumer. Old 19(2) – removed requirement to convene a meeting on the consumer’s request to give more discretion to the supervisor and subsequent paragraphs renumbered Renumbered 19(2) -19(4) and the new 19(2) requires the consumer’s consent. 31 – removed as now in 17(10) Annex 6 The IVA term is automatically extended if there are extra payments in lieu of a re-mortgage. 54. Ongoing utility supplies and individual voluntary arrangements (IVAs) Insolvency practitioners dealing with consumer IVAs have provided feedback to the IVA Standing Committee advising that in some instances practical difficulties are being encountered when agreeing the consumer’s budget and payment method for the ongoing supply of certain utilities. When a consumer enters into an IVA it is not uncommon for their current payments in respect of some utilities to include a low level of pre-appointment arrears that should be treated as an unsecured debt. This can be caused by factors such as the timing of the appointment, or a consumer who pays a set amount each month to cover the cost of their annual gas supply finding themselves in arrears if an IVA is entered into at the end of the winter period or in credit at the end of the summer period. This can create a number of practical issues for both the insolvency practitioner and the utility provider, and can also be confusing and distressing for the consumer. The Insolvency Service has worked with the insolvency practitioner community and British Gas to understand the issues faced by all parties and to establish a way forward that balances the practical with the legal position. As a result a template process has been agreed for consumers with either an existing pre-payment meter or without an existing pre-payment meter. Both templates are attached to this article. The principles underpinning the templates are for: (i) ongoing energy supplied through a credit meter with an outstanding balance of less than £300 (which typically equates to the value of less than a quarter’s consumption); and (ii) customers paying for their ongoing consumption via a payment plan (for example monthly fixed direct debit)to be treated outside of the IVA in the first instance, unless there are exceptional circumstances, which will be reviewed on a case by case basis. The Insolvency Service is proposing to share this process, and the template, with Energy UK so that it can be made available to other energy suppliers. Insolvency practitioners who have an insolvency related query for a British Gas customer should, in the first instance, contact the British Gas Insolvency Escalations inbox at: InsolvencyEscalations@britishgas.co.uk. Any enquiries regarding this article should be directed towards email: IPRegulation.Section@insolvency.gov.uk 55. PPI Guidance Review in light of the decision in Green v Wright Following the decision in the case of Green v Wright it is now settled that where an IVA has created a trust over assets which is not terminated upon completion of the arrangement, and the supervisor receives the realisation of a trust asset after the completion of an IVA, it is in order for them to distribute these funds in accordance with the terms of the arrangement. This is notwithstanding that a Completion Certificate may have been issued to the debtor. The decision confirms that the mere issuing of the Completion Certificate will not itself, without express provision, terminate any trust over the arrangement assets. This decision should now enable insolvency practitioners to distribute funds being held pending this decision and they may also now agree assignments with debtors to deal with the PPI post-closure, in appropriate cases. Therefore it is no longer appropriate for this case to be cited as a reason for completion certificates to be withheld, or distributions to creditors further delayed. It is expected that practitioners will have already investigated the likelihood of PPI claims. Therefore, in most instances, the possibility of there being unknown claims in respect of which express provision had not been made, receipt of which then occurs post--closure (whether by termination or completion), should be infrequent. These factors may therefore limit the impact of the Green v Wright decision on those cases. Where a PPI refund is encountered following the closure of a case, practitioners should consider and ascertain the following: · Is the PPI refund an asset of the arrangement? · What is the effect on any continuing trust of the completion or termination of the arrangement? Insolvency practitioners should take particular care when negotiating settlements with debtors upon becoming aware of PPI claims and not to make inappropriate or misleading demands about the availability of post-completion PPI refunds. The Ethics Code makes clear that practitioners should act with objectivity and that self-interest may present a threat to that fundamental principle. Practitioners may wish to obtain legal advice if they are in doubt as to the availability of an asset and explain that advice to the debtors affected by it. In all cases, reference should be made to the terms of the individual proposal (and any approved modifications or variations thereto) to ascertain whether the standard conditions used have been altered in respect of the effect of completion or termination on any trust over the assets of the arrangement. Particular attention should be paid to any agreed modifications to the proposal, as it is not uncommon for modifications to contain specific provision terminating any trust upon the conclusion of the arrangement (for instance, where HMRC are a creditor). Where it is concluded that the trust has terminated, then there is no further action that the former supervisor can or is required to take. What are a former supervisor’s obligations in respect of closed cases? Supervisors of IVAs do not have a duty to seek out PPI mis-selling claims in closed cases although, depending on the terms of the IVA, he/she may have the power do so. Where he/she becomes aware of such a claim (e.g. a lending institution requests clearance to pay a sum in compensation to the debtor) and it is one that is commercially viable for the office holder to pursue, then the former supervisor should consider whether the terms of the IVA are such that the compensation is a trust asset which should be claimed by him/her acting as trustee for the benefit of the IVA creditors. Following the decision in Green v Wright, there is no new regulatory expectation as a consequence of that decision that an insolvency practitioner should routinely investigate, review and/or otherwise seek to re-visit closed cases. Where a supervisor becomes aware of the realistic prospect of realising PPI compensation, they should consider the entitlement to the claim proceeds and the length of time that has elapsed since the conclusion of the arrangement. When pursuing such a course, practitioners should be able to clearly demonstrate and have documented that they have struck a fair balance between the interests of the creditors and those of the debtor, in the circumstances of each case. It is very unlikely that a decision to pursue a post-closure recovery would be appropriate where it would not result in a distribution to the creditors. Unexpected PPI claims in “full and final settlement” cases It is imperative that reference is made to the precise terms of any variation, as these may themselves determine whether any existing trust has come to an end. However, in instances where it is concluded that the PPI was not fully compromised by the full and final settlement, the obligations and considerations which the insolvency practitioner should apply are likely to be similar to those that would arise in any closed case, and reference should be made to the PPI Guidance in this regard. Insolvency practitioners should be mindful that an ordinary interpretation of the words “full and final settlement” may reasonably lead a debtor to the belief that their obligations under the arrangement have been concluded, unless it has been expressly brought to their attention by the practitioner that certain assets remain part of a continuing trust. Creditors are likely to have a similar expectation that the matter has been concluded and that no further funds will be available to them. Where a supervisor concludes that there is a continuing trust over assets which were not included within the terms of the settlement, they should be able to demonstrate this with reference to the precise terms of the arrangement and evidence that they have acted fairly and impartially in reaching that conclusion. In any case where an insolvency practitioner has cause to assess the impact of Green v Wright on an IVA that they are supervising, care should be taken to fully document the strategy deployed, the decision reached and the reasons for both, in accordance with SIP 1. Enquiries regarding this article may be sent to IPRegulation.Section@insolvency.gov.uk
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