Insolvency technical update – March 2021
By David Menzies, Director of Practice
5 April 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.
The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021
The above regulations came into force on 26 March 2021.
The regulations further extend the duration of some of the temporary measures introduced by the Corporate Insolvency and Governance Act 2020 (CIGA 2020) as follows:
- The restrictions on the use of statutory demands and winding up petitions are extended from their current expiry date on 31 March 2021 to 30 June 2021.
- The modifications to moratorium provisions and temporary moratorium rules are extended from their current expiry date of 30 March 2021 to 30 September 2021.
- The small supplier exemption from termination clause provisions is extended from its current expiry date of 30 March 2021 to 30 June 2021.
The provisions suspending liability for wrongful trading in the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Suspension of Liability for Wrongful Trading and Extension of the Relevant Period) Regulations 2020, are also extended from the current expiry date of 30 April 2021 to 30 June 2021.
The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Certain Relevant Periods) Regulations (Northern Ireland) 2021
The above regulations came into operation on 29 March 2021.
The regulations further extend the duration of some of the temporary measures introduced by the Corporate Insolvency and Governance Act (CIGA 2020), as detailed above, for companies in Northern Ireland.
The Coronavirus (Scotland) Acts (Amendment of Expiry Dates) Regulations 2021
The above regulations came into force on 30 March 2021.
The regulations amend the expiry date of part 1 of the Coronavirus (Scotland) Act 2020 and part 1 of the Coronavirus (Scotland) (No.2) Act 2020 from 31 March 2021 to 30 September 2021.
Some of the temporary measures originally introduced by those Acts were made permanent through the Bankruptcy (Miscellaneous Amendments) (Scotland) Regulations 2021 (see below).
The extension therefore applies to the remaining temporary measures, namely:
- 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 removal of the prohibition against an individual benefitting from more than one moratorium in any 12-month period.
- The ability to allow meetings of creditors to take place using electronic means.
The extension does not apply to all provisions currently in the Acts as some provisions have already expired and a separate instrument expired early certain provisions on 30 March 2021 – the Coronavirus (Scotland) Acts (Early Expiry of Provisions) Regulations 2021. The provisions expired by those regulations do not benefit from any extension of part 1 of each of the Scottish Acts.
None of the provisions expired early relate to restructuring and insolvency.
The Bankruptcy (Miscellaneous Amendments) (Scotland) Regulations 2021
The above regulations came into force on 29 March 2021 and make permanent some emergency measures that were introduced last year through the Coronavirus (Scotland) (No.2) Act 2020.
The measures introduced include:
- 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 timescale for a trustee to submit their initial debtor contribution proposal to AiB from six weeks to 12 weeks.
The Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021
The above regulations have now been approved by both Houses of Parliament and will come into force on 30 April 2021.
The regulations impose conditions on substantial disposals in administration to connected persons, namely, that an administrator must not proceed with a disposal of property of a company within the first 8 weeks of that company entering administration without either an independent opinion on the disposal, or approval of creditors.
An article looking at the regulations in more detail is available on icas.com.
A joint ICAS webinar with R3, ICAEW and IPA will be held on 27 April at 10.30am to look at the new regulations and the role of the evaluator.
Statements of Insolvency Practice
Changes to three Statements of Insolvency Practice (SIPs) are effective from 1 April 2021. The changes relate to SIPs 3.2, 7 and 9.
To assist IPs and their staff, ICAS ran an online update session on 24 February and a recording of the session is available to view on demand.
Insolvency (England and Wales) Rules 2016: Call for evidence
The Insolvency Service has published a call for evidence on the Insolvency (England and Wales) Rules 2016.
The rules include a requirement, introduced by the Small Business, Enterprise and Employment Act, to carry out a review of the secondary legislation and publish a report setting out the conclusions of that review. The report must be published within five years of 6 April 2017, the date that the Rules came into force.
The call for evidence is therefore issued in order to gather information regarding the operation of the rules in the three years since their introduction.
This call for evidence closes on 30 June 2021. If any ICAS Members or affiliates have any views they would like to feed into ICAS’ response, please contact swood@icas.com.
Dear IP 123
Dear IP 123 has been issued by the Insolvency Service. The edition highlights issues encountered by Companies House in relation to the filing of insolvency forms, provides details of new guidance available for Official Receivers and sets out the temporary measures under CIGA 2020 which have been extended. The issue also provides details of a webinar being held by Co-operatives UK designed to help insolvency practitioners and accountants working with registered societies.
Furlough and redundancy
The Insolvency Service has updated its guidance for people who were furloughed using the Coronavirus Job Retention Scheme (CJRS), then made redundant due to their employer’s insolvency.
Insolvency Service guidance for Official Receivers
The Insolvency Service has published new guidance for the use of Insolvency Service staff and Official Receivers in England and Wales when acting as liquidator or trustee.
Insolvency Service helpline
The Insolvency Service helpline has reopened. The telephone number is 0300 678 0015.
Financial assistance for employers unable to pay statutory redundancy payments
The Insolvency Service has published guidance about the financial assistance available from the Redundancy Payments Service for employers who are unable to pay their employees redundancy pay.
Any employer not subject to formal insolvency proceedings can apply. This includes businesses that are still trading, have stopped trading but not entered formal insolvency or are going to stop trading soon, but are not expecting to enter formal insolvency.
An associated checklist has also been published.
Debt Respite Scheme (Breathing Space) guidance
The Insolvency Service has updated its guidance for creditors and money advisers about the Breathing Space scheme due to come into force 4 May 2021.
Temporary Insolvency Practice Direction
A temporary Insolvency Practice Direction (TIPD) comes into force on 1 April 2021. It replaces and extends the previous TIPD, which expired on the same day.
It applies to all insolvency proceedings throughout the Business and Property Courts in England and Wales, subject to any variations as directed by (in London) the Chief Insolvency and Companies Court Judge or (outside London) the relevant Supervising Judge. It will remain in force until 30 June 2021 unless amended or revoked by a further insolvency practice direction.
Its purpose remains to assist court users during the continuing COVID-19 pandemic by avoiding the need for parties to attend court in person, and to deal with some of the problems arising from the need for the court(s) to operate with limited staff and resources.
Common Financial Statement
The trigger figures for the Common Financial Statement are updated on 1 April 2021. The updated figures can be found on the Common Financial Statement website.
The National Minimum Wage (Amendment) Regulations 2021
The above regulations come into force on 1 April 2021, with a resultant impact on redundancy payments.
The Pensions Regulator guidance - Pension Schemes Act 2021
The Pensions Regulator (TPR) has issued draft guidance on its approach to the investigation and prosecution of the new criminal offences under the Pension Schemes Act 2021, as well as the interaction of the new offences with its other powers.
The Money Laundering and Terrorist Financing (Amendment) (High-Risk Countries) Regulations 2021
The above regulations came into force on 26 March 2021 and make amendments to the definition of "high-risk third country" in the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (“the MLRs”).
The regulations replace references to the European Commission’s list of high-risk third countries (in respect of which extra customer due diligence measures must be taken by relevant persons under the MLRs) with a list of such countries identified instead in a new Schedule 3ZA to the MLRs.
Albania, Burkina Faso, Cayman Islands, Morocco and Senegal are each newly defined as a “high-risk third country” as a result of the Regulations. Afghanistan, The Bahamas, Trinidad and Tobago and Vanuatu no longer fall within this definition.
AML Resources
New AML resources have recently been added to the ICAS General Practice Manual (M::ember login required). These include a suspicious activity reporting (SAR) helpsheet, an internal SAR template and a tipping-off helpsheet.
Legal update
Application in terms of section 31(6) of the Bankruptcy (Scotland) Act 1985 against the Accountant in Bankruptcy, trustee of the sequestrated assets of Mr Gordon Duffield Smith A judgment by the Sheriff at Glasgow on the debtor’s unsuccessful application for an order to exclude compensation in relation to a pension investment from vesting in the Permanent Trustee.
One Blackfriars Ltd, Re [2021] EWHC 684 (Ch) A case brought by the joint liquidators against the former administrators of the company, alleging that the administration was mishandled from the outset. In particular that the former administrators failed to act independently and in accordance with their legal duties, failed to properly assess the value of a site owned by the company and that they failed to market and ultimately sold at undervalue.
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