Insolvency technical update – April 2022
By Steven Wood, Practice Support Specialist (Insolvency)
6 May 2022
Insolvency technical update – your round-up of recent developments in insolvency
Ukraine crisis and sanctions
A resource hub has been created on the ICAS website to act as a central location for Members to access information on current sanctions and professional obligations, as well as the support and guidance available.
The sanctions regime continues to evolve and IPs should make sure that they have procedures in place to ensure they are aware of changes to Sanctions and are able to evaluate whether any changes impact on their cases.
The financial sanctions list and scope of activities covered by trade sanctions continues to change frequently. IPs should ensure that they regularly review cases for any parties who may be the subject of sanctions. This will include not only the subject of the insolvency case itself, but also management, beneficial owners and creditors connected to the case.
First Review of the Insolvency (England and Wales) Rules 2016
The Government has published its first report on the operation of the Insolvency (England and Wales) Rules 2016, as required under the review framework introduced by the Small Business, Enterprise and Employment Act 2015.
An article summarising the findings from the report has been published on the ICAS website.
Dear IP
Dear IP 144 has been issued by the Insolvency Service. The issue provides an update to article 89 (originally published in Dear IP 73 in October 2016) regarding financial sanctions and IPs.
Dear IP 145 has been issued by the Insolvency Service. The edition includes details of HMRC’s guidance on deemed consent procedures, updates to the RP14A template and an invitation to participate in a customer survey run by The Gazette.
Updates to RP14A
The Redundancy Payments Service introduced an expanded RP14A template for use with effect from 19 April 2022.
The associated upload instructions have also been updated.
HMRC Insolvency Guidance – deemed consent procedures
HMRC has issued guidance for IPs notifying HMRC of a CVL in England and Wales.
From 1 June 2022, if a company or IP knows HMRC is already dealing with the company on a compliance matter, any initial notification of a CVL should be sent directly to the HMRC officer handling that correspondence – not to the central mailbox.
Coronavirus (Recovery and Reform) (Scotland) Bill
The Scottish Parliament's COVID-19 Recovery Committee (‘the Committee’) has published its stage 1 report on the Coronavirus (Recovery and Reform) (Scotland) Bill (‘the Bill’).
The next step will be for Parliament to debate the Bill’s general principles. The debate will take place on or before the Stage 1 deadline of 12 May 2022 and will be streamed live and recorded on the Scottish Parliament’s website.
The Committee has requested that the Scottish Government provide a written response to the report prior to the debate.
Amongst its findings, the Committee considers the proposed creditors minimum debt level of £5,000 as set out in the Bill is reasonable and has welcomed the Scottish Government's intention to bring forward amendments at Stage 2 on the moratorium on diligence.
The Land Reform (Scotland) Act 2016 (Register of Persons Holding a Controlled Interest in Land) Regulations 2021
The above regulations came into force on 1 April 2022. A supporting document explaining the regulations has also been published.
The overarching purpose of the regulations is to increase public transparency in relation to individuals who have control over decision-making in relation to land. The regulations bring in a new Register of Persons Holding a Controlled Interest in Land (‘RCI’), which is maintained by the Keeper of The Registers of Scotland (‘the Keeper’).
It is important to note that double reporting for entities subject to other regimes is not required as there is no intention to duplicate existing publicly available information. As a result, entities who must report information to the register of people with significant control (‘PSC register’) do not require to also report to the RCI. This includes UK companies, Limited Liability Partnerships (LLPs), Scottish Limited Partnerships (SLPs), Societas Europaeae and Scottish partnerships where all the partners are limited companies.
The regulations contain provisions applicable to ‘recorded persons’ and ‘associates’. A ‘recorded person’ is an owner, or tenant of land under a long lease, and which has an associate. An ‘associate’ is defined as an individual or entity that has significant influence or control over a recorded person’s dealings with the land.
IPs should particularly note the new obligation to notify the Keeper and provide certain information (set out in the second entry of column 3 of the table in regulation 12) in the event of the winding-up or dissolution of a non-natural person (‘entity’) that is a ‘recorded person’ in term of the regulations. ICAS awaits confirmation from the Keeper on the appropriate method for that notification.
The regulations also require that in the event of the winding up or dissolution of an entity that is an associate, the person responsible for dealing with the assets or liabilities of the entity must, as soon as reasonably practicable, notify the recorded person of the winding up or dissolution. IPs will need to be mindful to conduct a search of the RCI for any appointments involving an entity to identify whether it is an associate.
An example of where an IP may encounter a ‘recorded person’, triggering a requirement to notify the Keeper, would be when dealing with the sequestration or trust deed of a Scottish Partnership where at least one partner is an individual. An individual partner may be recorded as holding land in trust for the partnership. However, the other partners of the partnership may not be named in the land register and their influence over the land is therefore not ascertainable through any other source. Those partners would consequently be ‘associates’ in terms of the regulations and the partnership would be a ‘recorded person’.
The Employment Rights (Increase of Limits) Order 2022
The above Order came into force on 6 April 2022.
For individuals made redundant on or after 6 April 2022, their weekly pay is now capped at £571, and the maximum statutory redundancy pay they can receive is £17,130.
Redundancy payments and protective awards guidance has been updated to reflect this change.
Notice of a court order in respect of a voluntary arrangement
The Insolvency Service has updated the name of the form used to give notice of a court order in respect of a voluntary arrangement for a Scottish-registered company from VAMC (Scot) to VAC (Scot).
The name of the equivalent form for England and Wales has been updated from VAMC to VAC.
The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2022
The above Order has been laid before Parliament. It comes into force on 16 May 2022 for the purposes of enabling the Financial Conduct Authority (FCA) to make rules and to give guidance; and for all other purposes on 29 July 2022.
The Order relates to the regulation of the pre-paid funeral plans sector by the FCA and contains amendments to the Financial Services and Markets Act 2000 relating to the role of insolvency practitioners, such that they are required to co-operate with the Financial Services Compensation Scheme (FSCS) – if so requested – in the event of the failure of a regulated funeral plan provider.
The Order also excludes insolvency practitioners from the general prohibition against carrying on the activity of a funeral plan contract as provider.
Legal update
Re Glam and Tan Ltd [2022] EWHC 855 (Ch): A recent English High Court decision which highlights the ways in which a director can be found liable, as well as the reasons why they may be relieved of responsibility, for breaches of section 212 of the Insolvency Act 1986. (via Brodies LLP)