Insolvency technical update – February 2022
Insolvency technical update – your round-up of recent developments in insolvency
Revision to the Common Financial Tool Notes for Guidance
Due to rising domestic fuel costs, the Accountant in Bankruptcy (‘AiB’) has increased the amount of the Common Financial Tool utility expenditure cost for gas; electricity, and others (coal, oil, Calor gas, solid fuel etc.) where the AiB will require sight of supporting evidence/estimates. This has been increased from £120 to £170 per month.
Section 6.4 of AiB’s Common Financial Tool Notes for Guidance has been updated to record this change.
Accountant in Bankruptcy sensitivity obligation
The AiB has issued a ‘Dear Trustee’ letter announcing the publication of a guidance note for trustees and money advisers for circumstances when the AiB is asked to withhold a debtor’s information from publication in the Register of Insolvencies (RoI) or the Debt Arrangement Scheme (DAS) Register.
Legislation allows the AiB to withhold information from the RoI or DAS Register if, in the opinion of the AiB, inclusion of the information would be likely to jeopardise the safety or welfare of any person.
The published guidance note sets out how the AiB will use this discretion and explains the process the AiB will follow in reaching decisions on requests for information to be withheld.
HMRC has announced that it will be closing VAT and Corporation Tax helpline phone services on Fridays during February and March as follows:
- CT – 25 February to 25 March 2022
- VAT (excluding bereavement) – 25 February to 25 March 2022 (excluding 4 March)
Where set-off applies in respect of a creditor that has both a preferential claim and a non-preferential claim, there is established case law (in the English Courts and which is likely to be persuasive if tested in the Scottish Courts) that the amount set off should be applied pro-rata to the different categories of debt due to the creditor to arrive at the provable or claimable amount.
It is understood that HMRC’s systems automatically apply set-off against the non-preferential element of its claim by default. In order for this to be rectified, it is necessary for IPs to contact HMRC to request that it manually applies set-off against the preferential element of its claim (for example a VAT refund being applied against HMRC's secondary preferential claim for VAT arrears).
It is also worth remembering that the application of set-off in Scotland operates differently than in England and Wales and that under Scots law set-off must be pled by the creditor and should not be applied automatically.
IPs should ensure that HMRC claims are appropriately scrutinised where there is the potential for set-off to ensure that it is correctly dealt with and allocated.
Redundancy payments as a company director
The Insolvency Service has published guidance for company directors who are claiming redundancy related payments.
The Coronavirus (Scotland) Acts (Early Expiry of Provisions) Regulations 2022
The above regulations were laid on 23 February 2022 and come into force on 29 March 2022.
The regulations expire early certain provisions in the Coronavirus (Scotland) Act 2020 and the Coronavirus (Scotland) (No.2) Act 2020 (‘the Scottish Acts’) on 30 March 2022.
These include provisions which modified the law on eviction notices to extend the period of grace that a landlord must allow a tenant, following the service of an eviction notice, before they can raise eviction proceedings and the measure that extended the minimum period required for eviction of commercial property tenants from 14 days to 14 weeks.
Regulations will be separately laid to amend the Scottish Acts so that Part 1 of both Acts expires on 30 September 2022.
That extension will apply to temporary bankruptcy-related measures (some of which are under review as part of the Coronavirus (Recovery and Reform) (Scotland) Bill), such as:
- The increase of the minimum debt level for creditor petitions to £10,000.
- The extension of the length of the moratorium against diligence from 6 weeks to a period of 6 months.
- The ability to allow meetings of creditors to take place using electronic means.
Creditors' winding up – Jersey
The Companies (Amendment No. 8) (Jersey) Regulations 2022 were made on 8 February 2022 and came into force on 1 March 2022.
The regulations amend Part 21 of the Companies (Jersey) Law 1991 by introducing a mechanism that will enable a creditor of an insolvent company to apply to the Royal Court of Jersey for that company to be placed into a creditors' winding up and for a liquidator to be appointed.
Coronavirus (Recovery and Reform) (Scotland) Bill
Legislation proposing the permanent adoption or temporary extension of some measures enacted during the coronavirus 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.
An article has been published on the ICAS website summarising the proposed measures in the Bill that would impact restructuring and insolvency. ICAS has also responded to the Scottish Parliament's COVID-19 Recovery Committee in relation to their call for views on the Bill.
Insolvency Service consultation: The Future of Insolvency Regulation
The Government consultation closes on 25 March 2022 and ICAS encourages its Members and Affiliates to respond to it directly.
A previous article provides a summary of the proposals.
ICAS will be responding to the consultation and also welcomes views and comments to feed into that response, which should be emailed to firstname.lastname@example.org in the first instance.
FCA’s approach to compromises for regulated firms
The FCA is consulting on guidance which sets out how it considers compromises and the factors it considers when assessing them, and its role when a firm proposes a compromise.
ICAS has issued a response to the consultation.
Economic Crime (Transparency and Enforcement) Bill
The government has brought forward the Economic Crime (Transparency and Enforcement) Bill in light of Russia’s invasion of Ukraine. The new legislation will help the National Crime Agency prevent foreign owners from laundering their money in UK property and ensure more corrupt oligarchs can be handed an Unexplained Wealth Order (UWO).
An accompanying factsheet on the ‘Register of Overseas Entities’ to be introduced by the Bill has also been published.
The Insolvency Practitioners (Recognised Professional Bodies) (Revocation of Recognition) Order (Northern Ireland) 2022
The above order came into operation on 16 February 2022.
The order has revoked the recognition of the Association of Chartered Certified Accountants (ACCA), under Article 350 of the Insolvency (Northern Ireland) Order 1989, as a body capable of authorising its members to act as insolvency practitioners.
Minor Hotel Group MEA DMCC v Dymant & Anor  EWHC 340 (Ch): A creditor's attempt to bring a moratorium under Part A1 of the Insolvency Act 1986 to an end following the monitors' decision not to terminate the moratorium has been rejected (via Brodies LLP).