Insolvency technical update – May 2021
By David Menzies, Director of Practice
2 June 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.
HMRC insolvency guidance – disclosure to trustees (Scotland)
HMRC has issued a bulletin providing more information about the circumstances where disclosure of taxpayer information to trustees in sequestrations and trust deeds may be permitted where neither a court order requiring disclosure, nor the consent of the taxpayer has been obtained.
Insolvency Service: directors of dissolved companies
The Insolvency Service are to be given powers to investigate directors of companies that have been dissolved via the Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill, if approved.
Extension of the power to investigate will also include the relevant sanctions such as disqualification from acting as a company director for up to 15 years. These powers will be exercised by the Insolvency Service on behalf of the Secretary of State for Business.
The measures will be retrospective and will enable the Insolvency Service to challenge directors who have inappropriately wound-up companies that have benefited from Bounce Back Loans.
Debt Respite Scheme (Breathing Space)
The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 came into force on 4 May 2021.
The Regulations establish the first part of the debt respite scheme ‘Breathing Space’ for people in problem debt in England and Wales. This part gives eligible people in problem debt who receive professional debt advice access to a 60-day period in which interest, fees and charges are frozen and enforcement action is paused.
For people receiving mental health crisis treatment, the Regulations establish an alternate route by which the protections of a moratorium may be accessed and ensures that the protections are in place for the duration of their crisis treatment.
A previous article looked at the Regulations in more detail. A further article provides a comparison between the scheme to be introduced by the Regulations and the Scottish moratorium on diligence.
The Insolvency Service has produced guidance about the scheme for creditors and money advisers.
FCA Guidance for insolvency practitioners on how to approach regulated firms
The FCA has published non-handbook guidance for IPs on how to approach insolvencies of regulated firms. The guidance aims to help IPs comply with the FCA’s rules and guidance and relevant legislation to achieve better outcomes for consumers and market participants when a regulated firm fails.
Debt Relief Order Consultation
The UK Government has published a summary of responses and its response to the consultation on proposed changes to the monetary eligibility criteria for debt relief orders (DROs).
It has been decided to make a number of changes to the original consultation proposals and the necessary legislation to effect the changes will be made as soon as possible. The proposed changes will:
- increase the total amount of debt allowable to £30,000;
- increase the allowable value of assets owned by the individual to £2,000;
- increase the maximum potential realisable value of a single domestic motor vehicle which can be disregarded by the official receiver to £2,000; and
- increase the level of allowable surplus income to £75 per month.
Dear IP
Dear IP 127 has been issued by the Insolvency Service. This edition provides details of the UK Government response to the Debt Relief Order consultation.
Dear IP 128 has been issued by the Insolvency Service. This edition provides details of the recently published FCA guidance for IPs on how to approach regulated firms in insolvency.
Companies House Forms
Companies House forms AM03 and AM03 (Scot) – Notice of administrator’s proposals have been updated to include sections on adding a statement or report on the disposal of assets, following the introduction of the Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021.
Consumer sales contracts: transfer of ownership
The Law Commission has been undertaking a project to reform the rules governing the transfer of ownership of goods to consumers.
It has now published a final draft Bill and report. If approved by the UK Government, the final draft Bill will introduce new rules into the Consumer Rights Act 2015 (“CRA 2015”) about the transfer of ownership under contracts for the sale of goods between a trader and a consumer.
Consumer law is a reserved matter and the CRA 2015, which the final draft Bill seeks to amend, applies to the whole of the UK.
However, the Law Commission for England and Wales cannot make recommendations for Scotland or Northern Ireland. Notwithstanding this, the Law Commission recommends that any changes are implemented throughout the UK, after appropriate engagement with the devolved administrations.
ICAS’ response to the original consultation can be found here.
The Administration (Restrictions on Disposal etc. to Connected Persons) Regulations (Northern Ireland) 2021
The above regulations come into operation on 25th June 2021.
The regulations impose conditions on substantial disposals by companies in administration in Northern Ireland 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.
Amendments to the Insolvency Arrangements for Insurers: consultation
The government is consulting on proposed targeted amendments to the insolvency arrangements for insurers, which aim to enable the UK authorities to better manage insurer distress in an orderly manner. The amendments are intended to make arrangements more robust, to better protect policyholders and reduce costs to industry and the wider financial sector.
This consultation closes at 11:45 pm on 13 August 2021.
Payment Protection Insurance (PPI) after bankruptcy
The Insolvency Service has updated its guide to what happens to a PPI claim after someone has been made bankrupt in England and Wales. Guidance has been added for creditors and claims management companies.
AiB statistics user survey
The AiB has published a survey seeking feedback on its intention to discontinue the publication of monthly insolvency statistics, following the reintroduction of more detailed quarterly statistics.
AiB DAS Digest
The AiB has published the latest edition of its ‘DAS Digest’. The edition contains:
- Latest statistics
- Impact of Covid
- DAS Team updates & top tips
- Eden updates
- Guest blog on debt advice during lockdown
Legal update
Lazari Properties 2 Ltd & Ors v New Look Retailers Ltd & Ors [2021] EWHC 1209 (Ch): The High Court has found in favour of UK retail chain New Look in the challenge brought by its landlords to its CVA. The Court rejected all challenges pursued by the landlords on the grounds of jurisdiction, material irregularity and unfair prejudice.