Apart from the obvious frustration, what steps do you take upon receiving the news one of your customers has gone into an insolvency process? You may have retention of title on stock, it may be a debt write off that is business-threatening to you.
For 30 years The Insolvency Act 1986 has been the basis for all insolvencies in England and Wales, subject to various amendments through statute or legal interpretations. However, 6 April 2017 saw the most fundamental change in legislation with The Insolvency (England & Wales) Rules 2016 (“The Rules”) coming into force.
Most of the Rules are a consolidation of provisions that were considered to be similar for each insolvency type within The Insolvency Rules 1986. Other changes are an attempt to “modernise”, such as the ability to communicate through electronic means or, simply via a website. Other changes are more fundamental on a practical level.
From hereon there will no longer be any physical creditor meetings, unless a requisite majority of creditors demand one. Instead we have electronic voting, virtual meetings, resolutions by correspondence and a process known as “Deemed consent”. The deemed consent procedure could mean notices are sent to creditors on one day and 7 days later a liquidator is appointed with creditors getting only a few days’ warning. So, what if you believe the conduct of directors has been questionable? Physical meetings have been a forum for posing relevant questions so, if you believe there is good cause for challenging the directors you must provide a written request for a physical meeting in a very short space of time. The burden to act quickly really does fall squarely upon your shoulders! Further information can be found here.
The Rules also place the onus upon creditors to monitor for progress reports. In the past an insolvency practitioner would send notice stating the progress report can be accessed on a specific website, providing you with the file name and password. That has ceased and it is now up to the creditor to monitor when the reports will be available. In theory, that is fine but a liquidator has two months after each anniversary to submit a progress report. What is the creditor supposed to do? Check every day until it is there?
For me, the Rules impose a burden on advisors, credit controllers and the financial institutions to be more aware, act instantly or roll over and let the process take its course. Personally, I am concerned the Government have gone too far and reforms to The Rules will occur but, until that time, creditors need to be proactive.
Should you require any further assistance on The Rules, or any other insolvency-related issue then please contact PBC Business Recovery & Insolvency to discuss and advise on your situation. Call Gary Pettit or Gavin Bates on 01604 212150 completely confidentially.