Insolvency technical update - June 2020
By David Menzies CA, Director of Practice
6 July 2020
Insolvency technical update – your round-up of recent developments in insolvency.
Coronavirus
This update relates to matter not directly linked to the coronavirus crisis. For coronavirus updates please go to the regularly updated A-Z of all things insolvency amid the coronavirus outbreak.
Corporate Insolvency and Governance Act 2020
The Corporate Insolvency and Governance Bill was laid in Parliament on 20 May 2020 and came into force as the Corporate Insolvency and Governance Act 2020 (CIGA 2020) on 26 June 2020, following an accelerated passage through Parliament.
The government previously consulted on changes to the corporate insolvency regime and announced plans to introduce new insolvency restructuring procedures in August 2018. The new legislation, in large part, implements those plans.
The overarching objective of CIGA 2020 is to provide businesses with the flexibility and breathing space they need to continue trading and avoid insolvency, particularly during this period of economic uncertainty.
A series of articles has been produced by ICAS looking at the various insolvency measures introduced by CIGA 2020.
CIGA 2020 was also the subject of an Ask ICAS webinar on 25 June.
Administration: sales to connected persons
As well as the measures covered in the series of articles mentioned above, CIGA 2020 also revives Paragraph 60A of Schedule B1 to the Insolvency Act 1986, which expired in May 2020.
Paragraph 60A gives the Secretary of State the power, by regulations, to make provision for prohibiting or imposing requirements or conditions in relation to, the disposal, hiring out or sale of property of a company by an administrator to a connected person.
Paragraph 60A now expires at the end of June 2021 unless the power conferred by it is exercised before then.
The Limited Liability Partnerships (Amendment etc.) Regulations 2020
The above Regulations make provision relating to the application the measures introduced by CIGA 2020 to limited liability partnerships (“LLPs”).
The Insolvency Act 1986 Part A1 Moratorium (Eligibility of Private Registered Providers) Regulations 2020
The above Regulations amend the Insolvency Act 1986 in order to ensure that Part A1 (Moratorium) does not apply in relation to companies which are private registered providers of social housing. They also make a consequential amendment to the Charitable Incorporated Organisations (Insolvency and Dissolution) Regulations 2012.
Practice Statement (Companies: Schemes of Arrangement under Part 26 and Part 26A of the Companies Act 2006)
A practice statement has been issued by the Judiciary of England and Wales directed to the practice to be followed on applications pursuant to Part 26 or new Part 26A of the Companies Act 2006 seeking the sanction of the court to a scheme of arrangement between a company and its creditors and/or members. The purpose of the practice statement is to enable issues concerning the jurisdiction of the court to sanction the scheme, the composition of classes of creditors and/or members and the convening of meetings to be identified and if appropriate resolved early in the proceedings.
Communications with HMRC IVA team
HMRC have advised that a new secure email system is in place to contact their IVA team. Emails can now be sent to vas@hmrc.gov.uk.
HMRC have asked that the following disclaimer paragraph is included as part of the initial proposal when first contacting the team:
“I understand that if I correspond with HMRC by e-mail, I accept the risks associated with using e-mail and I am happy for HMRC to send my company e-mails containing personal information. I understand that HMRC will reply to the e-mail address we have used, unless I specify an alternative.”
Register of inhibitions
Digital submissions may now be made to the Registers for Scotland for inclusion in the Register of Inhibitions. You can apply to add permissions for this to an existing RoS business account or apply for a business account via the RoS website.
Security considerations in an economically challenging time
The Centre for the Protection of National Infrastructure has issued guidance for businesses and insolvency office holders on managing security risks.
Code of practice for the commercial property sector
A code of practice endorsed by 19 bodies representing commercial property landlords and tenants has been issued. The code is voluntary and encourages tenants to continue to pay their rent in full if they are in a position to do so and advises that others should pay what they can, whilst acknowledging that landlords should provide support to businesses if they too are able to do so.
It will apply across the UK and encourages tenants and landlords to be transparent in their discussions and to act reasonably and responsibly.
Consultation on Statements of Insolvency Practice
The Joint Insolvency Committee (JIC) is consulting on changes to a number of Statements of Insolvency Practice (SIPs) including SIP 3.1 - Individual voluntary arrangements, SIP 3.2 - Company voluntary arrangements, SIP 7 - Presentation of financial information in insolvency proceedings and SIP 9 - Payments to insolvency office holders and their associates.
The JIC recognises that these are testing times. But these are only proposed changes. There is no intention to amend the SIPS without careful consideration of the responses received and any plan to introduce changes will take into account any continuing challenges faced by the insolvency profession.
Further details about the consultation can be found in an article on icas.com.
The consultation closes on 20 July 2020 and responses should be emailed to swood@icas.com.
Dear IP 103
Dear IP 103 has been issued by the Insolvency Service. The update introduces factsheets which explain details of the Corporate Insolvency and Governance Bill.
Dear IP 104
Dear IP 104 has been issued by the Insolvency Service. The update introduces draft guidance for monitors who will oversee the new moratorium introduced by the Corporate Insolvency and Governance Bill.
Dear IP 105
Dear IP 105 has been issued by the Insolvency Service. Included in the update are a link to the final guidance for monitors in relation to the new moratorium process and a link to the relevant forms to send Companies House regarding commencement, extension or end of the moratorium.
Redundancy Payments
New forms have been issued by the Redundancy Payments Services to help amend mistakes or add information to an online claim for redundancy.
AiB invitation to tender for Chartered Surveyor Services
It is the intention of the AiB to award a new contract for Chartered Surveyor Services. The current contract is due to expire at the end of November 2020.
The Invitation to Tender is accessible via the Public Contracts Scotland website. The deadline for responses is 4 August 2020 at 12 noon.
Legal update
Bresco Electrical Services Ltd (In Liquidation) v Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25 A case looking at the relationship between the adjudication regime for building disputes and insolvency set-off. The Supreme Court allowed the appeal, ruling that a liquidator is entitled to refer an insolvent company’s claims to adjudication where there are cross-claims between the parties.
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