Insolvency technical update – January 2021
By David Menzies, Director of Practice
3 February 2021
Insolvency technical update – your round-up of recent developments in insolvency
Coronavirus
For all coronavirus related updates please go to the regularly updated A-Z of all things insolvency amid the coronavirus outbreak.
Statements of Insolvency Practice
Following a Joint Insolvency Committee (JIC) consultation, changes are being made to three Statements of Insolvency Practice (SIPs) with effect from 1 April 2021. The changes relate to SIPs 3.2, 7 and 9.
An article is available which provides an overview of some of the key changes being. To assist IPs and their staff, ICAS will be running an online update session on 24 February at 10.30 am. Register for the update session here.
Scottish Courts
New arrangements were introduced in Scotland’s courts from 12 January 2021, with a view to supporting the public health response to the COVID-19 pandemic by reducing the number of people required to attend court in person. The measures will remain in place until 26 February 2021 with a review taking place on 15 February 2021.
The vast majority of all civil business in the Court of Session and Sheriff Court continues to be conducted remotely.
Guidance setting out arrangements for the disposal of proceedings in both the Court of Session and Sheriff Courts has been published.
The Bankruptcy (Miscellaneous Amendments) (Scotland) Regulations 2021
As the first stage of a general review of statutory debt solutions in Scotland, Jamie Hepburn MSP, Minister for Business, Fair Work and Skills, has introduced draft Regulations aimed at helping to address the consequences of the COVID-19 pandemic.
The specific proposals which have been brought forward are:
- Reduction of the Minimal Asset Process (MAP) debtor application fee to £50.
- Reduction of full administration bankruptcy application fee to £150.
- Removal of all bankruptcy debtor application fees where prescribed benefits are in payment.
- Increase in the debt threshold for access to the Minimal Asset Process route into bankruptcy from £17,000 to £25,000.
- Removal of student loans for consideration in the MAP debt threshold.
- Enablement of electronic signatures on applications for bankruptcy.
- Increase the time scale for a trustee to submit their initial debtor contribution proposal to AiB from six weeks to 12 weeks.
If approved by Parliament, the changes will come into effect on 29 March 2021.
Wider Review of Scottish Statutory Debt Solutions – stage 2 working groups
The Accountant in Bankruptcy is seeking volunteers to take part in working groups which will look at aspects of Scottish statutory debt solutions.
If you would like to volunteer to take part in the working groups, or if you have any feedback on the areas that are proposed to be discussed at stage 2 of the review, please email Policy@aib.gov.uk by Friday, 5 February 2021 and advise which working group you are interested in.
HMRC Debt Management EIS helplines
The decision has been taken to temporarily close all helplines across HMRC’s Debt Management EIS teams until further notice.
If any ICAS members or affiliates have any particularly urgent matters, please contact swood@icas.com.
ICAS General Practice Manual (GPM)
New helpsheets have been added to the GPM (member login required) which contain information relevant to IPs in relation to electronic signatures and signing off accounts, reports and other documents.
Brexit
The UK has left the EU and 31 December 2020 marked the end of the transitional period in which, under the Withdrawal Agreement, EU rules continued to apply. As a result, the legal frameworks under which insolvencies are managed across borders, and insolvency practitioners are recognised in the UK and the EU, have changed.
A ‘useful links’ page has been published on icas.com which provides signposting to relevant legislation and guidance.
Dear IP
Dear IP 118 has been issued by the Insolvency Service. The issue provides information on bulk payment of dividends in IVAs, details of guidance for IPs in relation to cross-border insolvencies, information about cheque payments to HMRC and details of changes to cheque payment production by the Insolvency Service.
Dear IP 119 has been issued by the Insolvency Service. The issue provides details of the extension of the IVA Protocol COVID-19 guidance.
Cross-border Insolvencies: Recognition and enforcement in EU Member States from 1 January 2021
The Insolvency Service has published guidance for insolvency officeholders which seeks to provide some basic information regarding the applicable frameworks in the different EU member states, as a starting point towards seeking recognition for UK insolvency proceedings and dealing with assets in the EU.
Companies House compulsory strike off process
Companies House has advised that it has temporarily paused its voluntary and compulsory strike off processes for one month from 21 January until 21 February 2021.
Company dissolution: Companies House records
Companies House has announced that it has stopped removing records of dissolved companies from the Companies House Service (CHS) with immediate effect, and that it will put additional dissolved records (all companies dissolved since 2010) back onto CHS from January 2021.
Debt Relief Orders: Consultation on changes to the monetary eligibility criteria
The Insolvency Service has launched a consultation seeking views on a proposal to increase the existing monetary eligibility limits of Debt Relief Orders (DROs) in order to give more people with low-levels of assets and low income who are in problem debt access to a suitable and proportionate option for debt relief.
Responses are invited by 26 February 2021.
DAS - missed payments
The AiB has indicated that, from 18 January 2021, the DAS Administrator started an exercise to write to every DAS client who has missed more than 3 payments, asking that they make contact with their money adviser as a matter of urgency to establish if DAS is still the correct debt solution or to see if there are any changes which could be made to the DPP to make it sustainable.
Anti-money laundering – UK financial sanctions list
The Office of Financial Sanctions Implementation (OFSI) publishes a list of all those subject to financial sanctions imposed by the UK.
That list has recently been updated and IPs should bear in mind the need to consider the list as part of their AML requirements.
Individual Voluntary Arrangement (IVA) protocol guidance
The COVID-19: Individual Voluntary Arrangement (IVA) protocol guidance was revised with effect from 7 September 2020. The IVA Standing Committee has agreed that the revised guidance will now be extended until 30 April 2021.
Insolvency Service newsletter
The latest edition of the Insolvency Service newsletter includes details of the consultation on Debt Relief Orders and links to guidance published in relation to cross-border insolvencies and the Debt Respite Scheme (Breathing Space).
Advertising Standards Agency (ASA) rulings
The ASA has banned misleading advertisements by two commercial debt advice/lead generator firms.
IPs are reminded of their requirements under the Code of Ethics (Section 2360) as they relate to third party advertisements and IPs.
Legal update
The Royal Bank of Scotland plc v Mrs Alison Donnelly and Antonia McIntyre [2020] CSOH 106 An article has been published on icas.com looking at the Court of Session’s latest judgment in the long-running litigation involving these parties.
Financial Conduct Authority (Appellant) v Arch Insurance (U.K.) Ltd and others [2021] UKSC 1 In a significant test case brought by the Financial Conduct Authority, the Supreme Court has confirmed business interruption insurance coverage for losses arising from COVID-19. As a result of the judgment IPs should consider for any appointments since March last year whether the business held insurance where a claim may now exist.
Uralkali v Rowley and another [2020] EWHC 3442 (Ch) The High Court confirmed that it is unlikely that an officeholder would be found to owe a duty of care to participants in a sale process out of an insolvent estate, stating ”the court should hesitate before imposing on an administrator a personal duty in tort in respect of the conduct of a sales process in an administration”.
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