Covid Recovery and Reform Bill introduced
By Steven Wood, Practice Support Specialist (Insolvency)
4 February 2022
Legislation proposing the permanent adoption or temporary extension of some beneficial measures enacted during the coronavirus (COVID-19) pandemic has been published by the Scottish Government.
The Coronavirus (Recovery and Reform) (Scotland) Bill (‘the Bill’) proposes changes in 30 specific legislative areas, which were modified by temporary provisions made under Scottish and UK coronavirus legislation.
If follows on from the consultation, Covid recovery: justice system, health and public services reform, which focussed on reviewing the legislative powers that have supported the government’s response to the pandemic.
ICAS responded to that consultation, and specifically to topics P2, P3, P4, P5, P8, P12, J1 and J2, being those identified of direct relevance to Members and Affiliates dealing with restructuring and insolvency.
The proposed measures in the Bill impacting restructuring and insolvency are summarised below.
Service of documents
A new section - 224A - is to be inserted into the Bankruptcy (Scotland) Act 2016 (‘the 2016 Act’), which will apply whenever the 2016 Act, or regulations made under it, authorises or requires a document to be served on a person, whatever particular wording is used to describe this action (including, for example, giving or sending).
Service of a document will be allowed by personal delivery, by post or by electronic transmission.
However, in order to communicate electronically, the trustee must have indicated that the recipient is willing to receive a document. The recipient’s willingness may be:
- specific to the document in question or generally applicable to documents of that kind;
- expressed specifically to the sender or generally (for example on a website); or
- inferred from the recipient having previously been willing to receive documents from the sender in that way and not having indicated unwillingness to do so again.
It is also clarified that the uploading of a document to an electronic storage system (i.e., a website) from which the recipient can download the document may constitute electronic transmission of the document, where the recipient is sent a notification that the document has been uploaded in that way.
As drafted, the Bill seems to suggest that this notice would be required on each and every occasion a document is uploaded which would of course reduce the intended impact of the provision.
Where a document is sent via electronic means, it is taken to have been received on the day of transmission unless the contrary is shown.
Unfortunately, the wording of the Bill as drafted does not appear to allow a trustee to rely on presumed consent for electronic communication with creditors as a result of the debtor’s dealings with them pre-insolvency, something which ICAS shall be raising as the Bill makes its progression through the Parliamentary stages.
Qualified creditors minimum debt level
It is proposed that the definitions of “qualified creditor” and “qualified creditors” are amended in section 7(1) of the 2016 Act by raising the amount of money a creditor or a group of creditors must be owed in order to be “qualified” from £3,000 to £5,000. That amount has been temporarily raised to £10,000 by the Coronavirus (Scotland) (No.2) Act 2020, a measure currently due to expire on 31 March 2022.
Unless further extended in the short term, it is likely that there will be a period of time where the debt amount would revert back to £3,000 while this Bill makes its way through Parliament.
Remote meetings of creditors
Schedule 6 of the 2016 Act is to be amended to allow meetings of creditors in bankruptcy to take place using electronic means, as well as in person. The Bill does not propose setting out further detailed provisions regarding minimum standards of access or notification as has been done in equivalent corporate insolvency legislation.
Register of inhibitions: electronic signature of documents
The Bill makes provision for registration or recording in the Register of Inhibitions to proceed on the basis of electronic submission of documents and copies of documents to the Keeper of the Registers, by proposing the insertion of inserting a new section 148A into the Bankruptcy and Diligence etc. (Scotland) Act 2007.
Documents will need to be signed by way of a basic electronic signature in order to be registered in the Register, including a version of an electronic signature which is reproduced on a paper document.
The document must be transmitted by a means (and in a form) which is specified on the Keeper’s website as being acceptable for those purposes.
From the perspective of insolvency practitioners this will allow documents such as the court order granting warrant to cite (in creditor petition cases) or AiB granted award (in debtor petition cases) and renewal of inhibitions to be sent for recording in the Register of Inhibitions via electronic means.
Statutory declarations
Section 30 of the Bill proposes the removal of the legal requirement for a lawyer to be physically present in order to witness someone signing a document or to take someone’s oath or to receive their affirmation or declaration and it removes any legal requirement for a lawyer who is signing a document to do so in the physical presence of another person. This would permit such tasks to be carried out via electronic meeting communication software.
Courts and tribunals: conduct of business by electronic means etc.
The Bill proposes continuing certain temporary provisions on a longer extension basis as a response to the impact of coronavirus on Scotland’s justice system.
These include the various provisions allowing the Scottish courts to conduct business via electronic means including submission of documents and attending a court or tribunal.
While not specific to insolvency related court business, these provisions are perhaps some of the more contentious elements of the Bill and have already attracted criticism. Contentious provisions such as these will impact heavily on the timescale for the Bill’s progress through Parliament.
The decision to put a long stop date of 30 November 2023 for the expiry of these temporary provisions may however temper some of the expressed opposition.
Tenancies
The Bill proposes a number of changes to tenancies, including:
- making all eviction grounds discretionary for private residential tenancies, assured tenancies and tenancies under the Rent (Scotland) Act 1984.
- the implementation, on a permanent basis, of a pre-action protocol which will apply in relation to any attempt by a landlord to end a private residential tenancy, or an assured tenancy, on a ground relating to rent arrears.