Insolvency technical update – March 2022
Insolvency technical update – your round-up of recent developments in insolvency
Ukraine crisis resource hub
ICAS has released a statement on the invasion of Ukraine and reminded Members of their professional and ethical obligations in relation to the current 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.
IPs should ensure that they frequently review cases for any parties who may 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.
AML - High Risk Third Countries
The list of high-risk third countries specified in Schedule 3ZA of the MLRs has been substituted with a new list by the Money Laundering and Terrorist Financing (Amendment) (High-Risk Countries) Regulations 2022. The regulations came into force on 29 March 2022.
The new list has added UAE to the list of high risk third countries, while Zimbabwe has been removed.
National Crime Agency (‘NCA’) publications
The NCA has published a new Suspicious Activity Report (‘SAR’) Glossary Code for reporters relating to suspicious activity consistent with money laundering and linked to entities sanctioned by the UK, US, EU and other overseas jurisdictions.
A revised booklet has also been published to provide guidance on the use of SAR glossary codes and reporting routes.
AML Regulatory Actions Guidance
AML Regulatory Actions Guidance has been issued by ICAS setting out:
- when regulatory action will be taken;
- what action could be taken; and
- the regulatory penalties that could be applied.
Dear IP 142 has been issued by the Insolvency Service. The special edition provides important updates and guidance relating to the Government’s sanctions against Russian interests and what Insolvency Practitioners need to consider in order to ensure that requirements are not breached in the cases they administer. This includes guidance on the payment of dividends to sanctioned parties.
Dear IP 143 has been issued by the Insolvency Service. The issue details the new enquiry process relating to potential abuse of COVID-19 Government financial support schemes.
The Commercial Rent (Coronavirus) Act 2022
The above Act, primarily applicable in England and Wales, came into force on 24 March 2022. It has the effect of ring-fencing protected rent debts (including service charges, insurance, VAT and interest) and imposes a new moratorium which prohibits enforcement action by landlords where their tenants’ businesses were subjected to legally enforceable Covid-related closures. The Act also mandates an arbitration process to resolve disputes as to the ability of a tenant to pay protected rent debts.
The Coronavirus (Scotland) Acts (Amendment of Expiry Dates) Regulations 2022
The above regulations came into force on 30 March 2022.
The regulations amend the Coronavirus (Scotland) Act 2020 and the Coronavirus (Scotland) (No.2) Act 2020 (‘the Scottish Acts’) so that Part 1 of both Acts expire on 30 September 2022.
The extension applies 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.
Extension under these regulations does not apply to all provisions currently in the Scottish Acts as some provisions have already been expired while, as noted in last month’s technical update, a separate instrument has been made and laid to expire early certain further provisions on 30 March 2022 in the form of the Coronavirus (Scotland) Acts (Early Expiry of Provisions) Regulations 2022.
Common Financial Statement
The trigger figures for the Common Financial Statement are updated with effect from 1 April 2022. The updated figures can be found on the Common Financial Statement website.
AiB Dear Trustee - Supervision of Protected Trust Deeds Pre-2013 Regulations
The AiB has issued a ‘Dear Trustee’ letter which gives notice of its intention to re-commence its ongoing and regular supervision of the administration of Protected Trust Deeds (PTDs), which was temporarily paused due to the COVID-19 pandemic restrictions.
Option to tax land and buildings
HMRC has updated form VAT1614A, used to tell HMRC of an option to tax land or buildings.
The format of the form has changed so that it can be filled in online and printed. The section titled 'Previous exempt supplies' has also been updated.
The Economic Crime (Anti-Money Laundering) Levy Regulations 2022
The above regulations come into force on 1 April 2022.
The regulations make provision relating to the assessment, payment, collection and recovery of the Economic Crime (Anti-Money Laundering) Levy, introduced in Part 3 of the Finance Act 2022.
Part 6 applies the regulations to the IP where a person liable to pay the levy has become bankrupt; or is subject to winding-up, receivership, administration or an equivalent procedure.
Insolvency Service Guidance - Company health check: keeping your business on track
The Insolvency Service has published a guide aimed at directors which discusses the warning signs of insolvency and how managing an insolvent company incorrectly can lead to personal liability, being disqualified as a director, or both.
The guide includes fact sheets relating to bounce back loans and director’s loan accounts.
Insolvency Service Guidance - Debt Relief Orders: Guidance for debt advisers
The Insolvency Service has significantly updated and expanded its guidance on debt relief orders for debt advisers.
AiB Supervision Standard
Accountant in Bankruptcy has published the latest edition of its ‘Supervision Standard’ newsletter. The edition includes:
- Internal team updates
- Helpful hints and tips
- Updates on guidance and processes
Coronavirus (Recovery and Reform) (Scotland) Bill
ICAS gave evidence to the Scottish Parliament's COVID-19 Recovery Committee (‘the Committee’) as part of their consideration of the Coronavirus (Recovery and Reform) (Scotland) Bill (‘the Bill’) at Stage 1.
A recording of that meeting, along with the minutes and official report, can be found on the Scottish Parliament website.
An article previously published by ICAS summarises the proposed measures in the Bill that would impact restructuring and insolvency and ICAS’ response to the Committee’s call for views on the Bill has also been published.
Insolvency Service consultation: The Future of Insolvency Regulation
The Government consultation closed on 25 March 2022 and ICAS has submitted its response.
A previous article provides a summary of the proposals.
Corporate Insolvency and Governance Act 2020 (‘CIGA 2020’) – expiry of temporary insolvency measures
The remaining restrictions on winding up companies introduced by CIGA 2020, which were previously extended until 31 March 2022, have now expired.
This means the expiry of:
- The temporary £10,000 debt threshold for presenting a winding-up petition.
- The requirement for creditors to seek proposals for payment from a debtor business, allowing 21 days for a response before they can proceed with presenting a winding-up petition.
- The temporary protections for commercial tenants preventing the presentation of a winding-up petition in respect of rent or any payment due by a tenant under a lease where the debt is unpaid by reason of a financial effect of coronavirus.
Colonnade Properties Limited and others against Beechmount Limited (in liquidation): A commercial judge has ruled that the compulsory liquidation of a party to a litigation settlement agreement caused frustration of the contract and removed any requirement to pay the other parties to the case proceeds from the sale of a property in Edinburgh (via Scottish Legal News).
Re JD Group Ltd  EWHC 202: In a relatively rare case, a director has been found liable for fraudulent trading after failing to carry out proper due diligence relating to a series of transactions (DAC Beachcroft via Lexology).