Insolvency update – Coronavirus March 2020
A look at insolvency technical and general updates linked to coronavirus.
Guidance for Insolvency Practitioners in relation to the coronavirus outbreak
ICAS has produced guidance on IPs’ responsibilities and outlined its position in relation to insolvency monitoring visits.
AiB ‘Dear Trustee’ letter
The AiB has released a 'Dear Trustee' letter containing coronavirus contingency arrangements. Among the changes detailed in the letter are:
- The suspension of all division and sale actions related to occupied properties and the halting of all evictions until further notice in bankruptcy cases. The AiB “hope trustees will be in a position to show similar forbearance in light of the prevailing circumstances”.
- The removal of the requirement to send case files to the AiB where determination of a fee of over £15,000 in a 12-month period is requested.
- The relaxing of current supporting documentation requirements where possible to allow debtor applications to be processed.
- In the event of the trustee under a PTD being unable to obtain a physical signature, the AiB accepting electronic signatures on statutory forms and paperwork.
- The decision not to revoke DAS debt payment programmes due to non-payment until further notice where the missed payments are a consequence of coronavirus.
AiB ‘Dear Trustee’ – expanded PTD contingency arrangements
The AiB has released a further 'Dear Trustee' letter containing expanded coronavirus contingency arrangements.
The letter clarifies that the AiB believes it would be reasonable for trustees to decide not to increase the duration of PTDs where a causal link exists between non-payment and the coronavirus pandemic.
The letter also takes the opportunity to restate the AiB’s guidance that it is inappropriate to refuse to discharge a debtor because of circumstances beyond their control, such as a change of circumstances which prevents them from paying any contribution in terms of the trust deed.
AiB - Debt Arrangement Scheme - Information for DAS clients
The AiB has release two documents providing DAS emergency information.
COVID-19 Emergency: Information for DAS Clients contains information for those currently making payments through a DAS debt payment programme who are struggling to meet their ongoing obligations.
COVID-19 Emergency: DAS - Frequently Asked Questions currently contains answers to seven frequently asked questions. This document will be regularly updated by the AiB’s DAS team.
AiB office closure
As a result of the coronavirus crisis, the AiB’s office is closed to the public and visitors until further notice.
All communications with teams within AiB should now be done via their shared IT systems or e-mail, with a list of team contact information available on the website.
The Insolvency Service has issued ‘Dear IP 92’ – an edition specifically concerned with coronavirus. It includes:
*signposting to government emergency measures to support businesses and individuals expected to be adversely financially affected.
*Indications that the government is considering emergency legislation to help struggling businesses and an invitation to contact the insolvency service with suggestions.
Insolvency Service changes
All Insolvency Service (IS) offices are closed and there are consequently changes to the way the IS is delivering its services.
IS has reviewed its IVA registration fee process. IVA registration fees can now be accepted by BACS.
IS has confirmed that electronic signatures on requisitions will be accepted. (also covered in Dear IP 93)
IS has confirmed that it will accept requisitions of payments via email.
HMRC have issued guidance on how it is dealing with situations where an individual or company is already in an insolvency process and enforcement action during the COVID-19 period.
Pension Protection Fund
The PPF are currently unable to accept paper s120 notification submissions. Wherever possible, submissions should be made via the online notification service.
If you are unable to make a submission online, please email a copy to email@example.com or call the PPF on 0345 600 2541 to discuss further.
Changes to civil court business have been announced by Scottish Courts and Tribunals. IPs should note that civil business without witnesses will continue where possible and motions and ancillary business will be dealt with electronically where possible.
Documents due to be lodged may be posted to the offices or left at reception or public counters. Electronic submission of documents will be accepted where competent.
Notwithstanding the statement regarding civil business, ICAS has been made aware that the Courts are currently completing urgent business. It is understood that insolvency and court reporter appointments are not deemed to fall within that category.
Redundancy payments helpline
The Redundancy Payments Services (RPS) helpline is closed. However, redundancy claims processing continues as normal.
The RPS have provided alternative email contact details on their website.
The Gazette is unable to accept notices for publication by post or fax from 27 March 2020. Please place notices online or email firstname.lastname@example.org. Further information is available of the Gazette website.
Companies House filing
It is noted that IPs may find it increasingly difficult to file paper copy notices with Companies Houses in insolvency procedures in view of the restrictions in place.
This matter has been raised with the Insolvency Service who have confirmed that they are working to resolve some of the paper only filing mechanisms for insolvency forms. A communication to IPs will follow, advising them of the new process/solution.
Changes to corporate insolvency framework
The Government has announced plans to bring forward changes in legislation to temporarily suspend the wrongful trading provisions within the Insolvency Act 1986 and to introduce new measures to aid restructuring of companies. The measures will require legislation to be laid in Parliament and therefore the explicit details and effective date of introduction remain unclear.
Scottish personal insolvency moratorium
Emergency legislation brought forward to the Scottish Parliament includes provisions to extend the duration of the moratorium against diligence from the current six weeks to six months and remove the limit of having only one such moratorium in a twelve month period. The changes will come into effect when the Act receives Royal Assent, which could be expected around 8 April.
JIEB graduation ceremony postponement
The 2020 JIEB Graduation Ceremony, scheduled for June, has been postponed. The event has been re-scheduled to take place on Friday 30 October in The Great Hall at Moorgate Place, London, the headquarters of ICAEW.
ICAS corporate discussion group – cancellation
The ICAS Corporate Insolvency Discussion Group, scheduled to be held on 9 June, has been cancelled. The annual insolvency practitioners’ conference, planned for 24 and 25 November, remains scheduled to go ahead as things stand. As with all ICAS events, this will remain under review.
A look at some of the measures introduced in foreign jurisdictions which may guide what we can expect in the UK:
The German legislature is preparing a change in law to suspend the duty to file for insolvency in order to protect companies that fall into financial distress due to coronavirus. This will essentially suspend the duty of care directors owe to the company’s creditors and allow continued trade while insolvent (if that insolvency has been caused by coronavirus and there is a reasonable prospect of the company recovering) (via Lexology).
Changes to come into effect in Australia include:
- Creditors only being able to issue a statutory demand if the debt is at least $20,000 (rather than $2,000).
- The debtor company having 6 months from the date of service to respond to the statutory demand (rather than 21 days).
- Creditors only being able to initiate bankruptcy proceedings if the debt is at least $20,000 (rather than $5,000).
Individual debtors having 6 months from the date of service to respond to a bankruptcy notice served on them by a creditor (rather than 21 days).
- Directors being temporarily relieved from their obligations to prevent their companies trading while insolvent if the debts are incurred in the company's ordinary course of business.