Insolvency technical update – September 2021
By Steven Wood, Practice Support Specialist (Insolvency)
5 October 2021
Insolvency technical update – your round-up of recent developments in insolvency.
The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10) (No. 2) Regulations 2021
The above regulations came into force on 28 September 2021 for the purpose of regulations 1 and 2 and 1 October 2021 for the remainder.
The instrument revokes the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10) Regulations 2021, which were laid on 10 September 2021. That revocation, and the substitution of the new instrument for those regulations, addresses an error in the coming into force date for the provisions, which would otherwise have resulted in there being no restrictions under the Corporate Insolvency and Governance Act 2020 (CIGA 2020) on winding-up petitions made on 29 and 30 September 2021. A minor error identified in paragraph 4(3) of the inserted schedule 10 has also been corrected. The provisions are otherwise identical.
The regulations make provision to introduce new tapering measures restricting the use of winding up petitions with effect from 1 October 2021 until 31 March 2022. This follows the expiry of the restrictions on the use of statutory demands and winding up petitions, originally introduced by CIGA 2020, on 30 September 2021.
The new targeted temporary measures are:
- A new requirement for creditors to demonstrate that they have sought to negotiate repayment of a debt, before seeking to wind a company up. A creditor must send a notice to the company giving it 21 days to respond with proposals for paying the debt. Creditors will be required to confirm to the court that they have sent the notice, whether they have received any proposals from the company, and (if so), state why they are not satisfactory. In exceptional circumstances the 21-day response period can be shortened if the court agrees.
- The debt owed must be at least £10,000.
- Petitions cannot be brought in respect of a commercial rent debt until the end of March 2022 unless the creditor can prove that the non-payment of the debt is not related to the pandemic. The Ministry for Housing, Communities and Local Government has extended the moratorium on the forfeiture of commercial tenancies until 31 March 2022 to allow time for the implementation through primary legislation of a rent arbitration scheme, and this carve out serves to not undermine this scheme before it is implemented.
The new measures cover England, Scotland and Wales. Northern Ireland has implemented similar legislation to mirror the measures in the form of the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 11) Regulations (Northern Ireland) 2021, which came into force on 29 September 2021.
Part A1 moratorium
A series of statutory instruments came into force on 1 October 2021 to provide permanent procedural rules for the company moratorium procedure introduced into the Insolvency Act by the Corporate Insolvency and Governance Act 2020. The instruments are:
- The Insolvency (Scotland) (Receivership and Winding up) (Amendment) Rules 2021
- The Insolvency (Scotland) (Company Voluntary Arrangements and Administration) (Amendment) Rules 2021
- The Insolvency (England and Wales) (No.2) (Amendment) Rules 2021
These instruments replace the temporary moratorium rules for Scotland, England and Wales, which expired on 30 September 2021, by respectively incorporating permanent rules for the moratorium into:
- The Insolvency (Scotland) (Receivership and Winding Up) Rules 2018
- The Insolvency (Scotland) (Company Voluntary Arrangements and Administration) Rules 2018
- The Insolvency (England and Wales) Rules 2016
Act of Sederunt (Rules of the Court of Session 1994 and Sheriff Court Company Insolvency Rules Amendment) (Insolvency) 2021
The above Act of Sederunt came into force on 1 October 2021 (paragraphs 2(5), 2(6), 3(4) and (5) came into force on 29 September 2021).
It has amended the Rules of the Court of Session 1994 and Act of Sederunt (Sheriff Court Company Insolvency Rules) 1986 in consequence of amendments made by the new statutory instruments providing permanent procedural rules for the company moratorium procedure and the regulations introducing new tapering measures restricting the use of winding up petitions.
The Co-operative and Community Benefit Societies (Administration) (Amendment) Order 2021
The Order came into force on 30 September 2021.
The Order applies, on a continuing basis, the insolvency rules found in Parts 3 and 4 of Schedule 4 to CIGA 2020 concerning company moratoriums, as modified for relevant Co-operative and Community Benefit Societies.
The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Relevant Period in Schedule 8) (No.2) Regulations (Northern Ireland) 2021
The above regulations came into operation on 29 September 2021.
The regulations provide for Schedule 8 to CIGA 2020, which makes temporary provision with respect to company moratoriums, to remain in effect in Northern Ireland until 30 March 2022.
Updated HMRC insolvency guidance – disclosure to trustees (Scotland)
HMRC has updated the bulletin it previously issued earlier this year, which provides 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.
The bulletin has been updated to include a link to the information disclosure guide within HMRC’s internal manual.
Updated HMRC insolvency guidance – recording tax and national insurance - dividend payments to former employees of an insolvent entity
HMRC has updated the bulletin it previously issued earlier this year on the subject of recording tax and national insurance for preferential dividends.
The bulletin prompted some questions and feedback from IPs, so the guidance has been updated to include a question-and-answer section.
HMRC Insolvency Guidance - Insolvency Practitioner appointments
HMRC has issued a bulletin concerning IPs seeking appointment in insolvency cases where there are no tax compliance issues or active HMRC investigations.
Insolvency (VAT Notice 700/56) – funded pension schemes
Insolvency (VAT Notice 700/56) has been updated to add information added about unincorporated associations and clubs, and payment of Corporation Tax.
Dear IP
Dear IP 136 has been issued by the Insolvency Service. The edition features details of the permanent rules for the Part A1 moratorium and the new targeted temporary criteria for winding up petitions.
Dear IP 137 has been issued by the Insolvency Service. The edition provides an update on HMRC service levels and information for IPs seeking HMRC support for their appointment in insolvency cases where there are no tax compliance issues or active HMRC investigations.
SIP 16 disclosures reminder
Following a number of recent enquiries, IPs are reminded that they should send a copy of their SIP 16 disclosure to their Recognised Professional Body (RPB). For joint appointments, only one SIP 16 disclosure needs to be sent to the RPBs. The lead IP should send the statement to their RPB, even if the joint appointees are licensed by different bodies. Joint appointees must ensure that the SIP 16 disclosure has been sent to the lead IP’s RPB.
SIP 16 statements being issued to ICAS should be sent to sip16@icas.com.
PTD Protocol
The AiB has introduced a PTD Protocol (the Protocol) with effect from 1 October 2021. The Protocol sets out non-statutory changes to operational processes. In summary, the measures introduced for IPs signing up to the Protocol are:
- Wherever practicable, an interim dividend should be paid to creditors after month 12 from the date the trust deed is granted, and quarterly thereafter.
- Should a trustee decide to withhold the debtor’s discharge from the debts included in the PTD, the trustee must first obtain the AiB’s agreement to that decision.
- Insolvency Practitioners may only accept trust deed referrals from FCA approved lead generator firms.
An article taking a more detailed look at the Protocol is available on icas.com.
Bounce Back Loans: FAQs for the Insolvency Profession
Last month’s technical updated advised that an FAQ for the insolvency profession had been compiled by R3, in conjunction with UK Finance, British Business Bank and the Insolvency Service, on the interaction between Bounce Back Loans and insolvency situations.
Following a discussion on the FAQ between the Insolvency Service and R3, ICAEW, IPA and ICAS (“the RPBs”), the original answer to Q.10, has been withdrawn and replaced by a new answer, along with a joint statement by the RPBs.
The Postal Administration Rules (Northern Ireland) 2021
Subject to the exclusions set out at Rule 1(2), the Rules come into operation on 11 October 2021.
The Rules provide the procedure to underpin the special administration regime applicable to companies which provide a universal postal service but are subject to a postal administration order.
Legal update
PSV 1982 Ltd v Langdon [2021] EWHC 2475 (Ch): An English High Court decision relating to the liability of directors in terms of section 217 of the Insolvency Act 1986 for their breach of the terms of section 216, relating to restrictions on the re-use of a company name (via Kepstorn solicitors)
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