Insolvency Technical Update - July 2019
Insolvency technical update – Your round-up of recent developments in insolvency.
The Insolvency (Scotland) Rules 2018 (Miscellaneous Amendments) Rules 2019 ("the rules"). The Small Business, Enterprise and Employment Act 2015 (Consequential Amendments, Savings and Transitional Provisions) Regulations 2019 ("the regulations")
Two statutory instruments have been laid which make minor corrections to the new Scottish Insolvency Rules and make miscellaneous amendments to reserved and devolved legislation required as a result of their introduction. More detail on the amendments contained within the rules and the regulations is available in a separate article. The amendments are effective from 23 July 2019.
The Act of Sederunt (Rules of the Court of Session 1994 and Sheriff Court Company Insolvency Rules Amendment) (Insolvency) 2019 has been laid, effective 16 August 2019.
The Act of Sederunt effectively reinstates r7.13A of the Insolvency (Scotland) Rules 1986 in relation to applications under s176A(5) of the 1986 Act to disapply the prescribed part.
It also corrects the omission of the requirement for the court to notify an officeholder of an appointment as interim liquidator under section 138(1) (and of appointments made in the rarer circumstances of s139(4), 140(1) and 140(2)). This omission was highlighted in a previous article published on icas.com.
The Accountant in Bankruptcy’s new DAS case management system eDEN went live on 1 July 2019. All new DAS applications must be submitted via the new web portal.
The Pension Protection Fund (PPF) has published the latest in its series of insolvency guidance notes titled: ‘Guidance Note 8 – Situations involving new or successor schemes’. The guidance provides information for insolvency practitioners when proposing to reduce rather than remove pension liabilities by setting up a new or successor scheme. The guidance covers a number of areas in this rare type of restructuring including asset & liability allocation, benefit design and ongoing employer support.
The Debt Arrangement Scheme (Scotland) Amendment Regulations 2019
The draft legislation for the introduction of The Debt Arrangement Scheme (Scotland) Amendment Regulations 2019 has been laid in parliament. The regulations are expected to come into force on 4 November 2018. An article published on icas.com considers the regulations in more detail.
The Economy, Energy and Fair Committee is currently considering this instrument and has invited views on the proposed changes by 16 August 2019.
Companies House late filing penalties
Companies House has updated guidance on how it assesses penalty appeals made by businesses for the late filing of accounts, with the changes coming into effect from 1 October 2019.
FREE online training on vulnerability
A FREE online training module has been produced and made available by Just and SOLLA. While focussing on vulnerabilities in later life, much of the content applies to vulnerable persons more generally.
DAS consultation - returning funds to the free advice sector
The Accountant in Bankruptcy (AiB) has published a further consultation which builds upon its response to earlier consultations, and the changes to the Debt Arrangement Scheme they proposed. The latest ‘sub-consultation’ is titled ‘Returning Funds to the Free Advice Sector’ and is considered further in an article published on icas.com.
The closing date for responses is 20 August 2019.
Changes to protect tax in insolvency cases
Draft legislation has now been published, to be introduced in Finance Bill 2019-20, to amend s386 and Schedule 6 to the Insolvency Act of 1986 and s129 and Schedule 3 of the Bankruptcy (Scotland) Act 2016. The effect will be to move HMRC up the creditor hierarchy for the distribution of assets in the event of insolvency by making HMRC a secondary preferential creditor in respect of certain tax debts held by a business. The measure will have effect from 6 April 2020.
The move follows the Budget Statement by the Chancellor on 29 October 2018 and subsequent consultation paper issued by HMRC, which closed on 27 May 2019.
Scottish Insolvency Statistics
The AiB has released official statistics reporting personal and company insolvencies for the first quarter (April to June 2019) of 2019-20 and final estimates for the 2018-19 financial year.
There were 3,520 personal insolvencies (bankruptcies and protected trust deeds (PTDs)) in 2019-20 Q1, up from 3,216 in the same quarter the previous year.
The number of Scottish registered companies becoming insolvent or entering receivership decreased in the first quarter of 2019-20, with 239 companies becoming insolvent compared with 245 in 2018-19 Q1.
The final statistics for 2018-19 show that there were 967 corporate insolvencies (liquidations and receiverships only) in 2018-19, up from 884 the previous year. Personal insolvencies (bankruptcies and PTDs) increased by 20.6% to 12,788 from 10,602 in 2017-18.
Call for evidence on insolvency practitioner regulation
The government has launched a call for evidence and is seeking views on the impact of the regulatory objectives introduced for the insolvency profession in 2015.
The purpose of the document is to seek evidence that will help inform the government on whether changes are necessary to the current regulatory framework for insolvency practitioners in the UK, including whether to consult on the use of existing legislative powers to create a single regulator.
The closing date for responses is 4 October 2019.
Protected Trust Deeds Consultation
The Scottish Government’s consultation on proposed changes to Protected Trust Deeds closed on 19 April 2019. The responses (where permission has been granted) to the consultation have now been published on the Scottish Government website.
David Mond against Craig Alexander Booth. The Sheriff at Airdrie has confirmed that sequestration can be granted on the application of a trustee under a Trust Deed where the trustee states that it is in the best interests of the creditors to do so. The Court is not required to consider the strength of the statement.
Palmer Birch (A Partnership) v Lloyd & Anor  EWHC 2316 (TCC) The High Court has held that directors of an insolvent company are personally liable to an unpaid supplier despite neither director having provided personal guarantees. The directors were liable for inducing a breach of contract and unlawful interference (via Taylor Wessing)
Azuonye -v- Kent  EWCA Civ 1289 The High Court has held on appeal that an unpaid Income Payment Order stands as an ordinary claim in a subsequent bankruptcy and that the trustee of the earlier bankruptcy could not pursue the bankrupt for the unpaid instalments of the IPO after the subsequent bankruptcy. (via Kepstorn Solicitors)