10 predictions for the insolvency profession in 2017
2017 looks to hold a significant number of changes for those involved in insolvency and restructuring. We look ahead and highlight what insolvency practitioners need to look out for in the coming year.
2016 saw significant developments in many areas for the insolvency and restructuring profession. In many ways, the forthcoming year will see many of those developments continue to impact on those working in the sector. Some emerging issues however are likely to gain increased focus and attention from government and regulators in 2017.
1. Modernised insolvency rules
After a substantial period of scrutiny by the Insolvency Rules Committee, the long awaited Insolvency (England & Wales) Rules 2016 (the 2016 Rules) were laid in Parliament and will commence on 6 April 2017, 6 months later than had been intended by the Insolvency Service.
The 2016 Rules will result in a significant departure from current insolvency working in some areas. For example, creditor meetings will no longer be the default position and decisions normally taken by creditors at such meetings will be able to be approved by ‘deemed consent’ – consent unless a specified percentage of creditors object. This won’t however apply to remuneration, removal of an office holder or approval of voluntary arrangements.
In addition those familiar with the layout of the Insolvency Rules 1986 will need to adapt to a new approach with the 2016 Rules. While the 1986 Rules were laid out by insolvency procedure (administration, receivership, liquidation, etc), the new Rules draw out many more common parts to all insolvency procedures (claims, decision making, reporting and remuneration, etc).
2. New corporate insolvency rules for Scotland
ICAS has long called for the updating and modernisation of corporate insolvency rules in Scotland. The Insolvency (Scotland) Rules 1986 have been tweaked over the years but lack the advancement seen in England & Wales to allow, for example, the use of electronic communication and websites in all corporate insolvency procedures. The Scottish Rules also leave many more gaps in procedures in comparison to the England &Wales counterparts and that has often resulted in court actions being required to obtain clarity on certain matters.
The Scottish Government have already started the process to introduce a new set of corporate insolvency Rules by passing the Public Service Reform (Insolvency) (Scotland) Order 2016. This allows amendments to the Insolvency Act 1986 to be made in preparation for the new Rules. A further Public Service Reform Order is due to be laid shortly.
A Working Group has been set up by the Accountant in Bankruptcy to inform and advise in the drafting of the new Rules and has now met on several occasions. So, what do we know so far?
- There will be 2 sets of Rules to replace the existing single set. One covering the reserved areas of CVA and administration and another set covering the devolved areas of receivership and liquidation.
- The Scottish Rules will broadly mirror the new England & Wales Rules where possible
The timetable being mooted is that the new Scottish Rules would be introduced in October 2016 with both sets of Rules being introduced at the same time. It remains an ambitious target.
3. Personal Insolvency changes
The Bankruptcy (Scotland) Act 2016 commenced on 30 November 2016 and consolidated over 30 years of bankruptcy legislation into a new Act. Despite the new Act being brought forward to simplify legislation, it is likely that the first set of amendments will be brought forward in early 2017.
Provisions relating to essential supplies are in line to be amended to bring them into alignment with the corporate insolvency provisions. This will extend the scope beyond utility supplies to It and other equipment as well as prohibiting insolvency related terms of a contract.
The AiB are also likely to publish their response to the Protected Trust Deed, Debt Arrangement Scheme and Diligence consultations carried out during 2016 which will result in changes being brought forward in these areas.
4. Statements of Insolvency Practice
As a result of changes to legislation highlighted above there is likely to be an array of amended SIPs in 2017.
The current Joint Insolvency Committee work programme highlights work on SIPs 7, 8, 10, 11 and 15.
SIP 15 has already been consulted upon and is likely to be issued by the RPBs early in 2017.
The JIC are also continuing their work on the Code of Ethics which should come to fruition in the year ahead with a consultation scheduled to be issued during Q1 2017.
6. Bonding and estate funds
The Insolvency Service call for evidence on bonding for insolvency practitioners closed in mid-December 2016. Given the serious weaknesses identified and recent failures to protect estate funds which have been seen, it is highly likely that measures will be brought forward in 2017 both by the Insolvency Service and the RPBs to address these issues.
7. The recast EU regulation on insolvency
With Article 50 expected to be triggered by the UK by the end of March 2016, the effects of the UK’s membership of the European Union will continue to impact the UK in the meantime.
The recast EU regulation on insolvency (Regulation 2015/848) will apply to insolvency proceedings from 26 June 2017. Some of the key changes coming into effect in June 2017 include:
- Extension of scope of the regulation to cover hybrid and pre-insolvency proceedings
- Codification of determination of centre of main interests for the opening of main insolvency proceedings - COMI will be presumed to be at the registered office, but the presumption is rebuttable in certain circumstances
- Secondary proceedings where a company has an establishment: these will no longer be limited to liquidation proceedings
- the courts of the member state where main insolvency proceedings are opened will also have jurisdiction to hear actions derived directly from the insolvency proceedings that are closely linked
- the recast Regulation introduces a framework for group insolvency proceedings with the aim of improving the efficiency of insolvency proceedings concerning different members of a group of companies to encourage cooperation across the group and rescue of the group as a whole
8. New regimes
Commencement of special insolvency regimes for registered providers of social housing and further education and sixth form colleges are likely. These are the latest in an increasing number of areas where measures other than a return to creditors become the main priority of the insolvency procedure.
We can also expect to see some developments to progress a new corporate restructuring regime including the creation of a moratorium period for financially distressed companies, new restructuring plan process and changes to essential supplier provisions.
9. Collective redundancy consultations
It’s over a year now since the Insolvency Service published their response to the Call for Evidence into collective redundancy consultation in insolvency situations. Despite their response to concerns raised in the evidence that they would ‘carry out further work to see how best to address the points raised’, there has been little evidence of that work being carried out.
There have been some signs recently of tentative proposals being sounded out amongst stakeholders and therefore we might expect some public signs of developments in this area during the coming year.
10. The known unknown
The above are only some of the key changes for the insolvency and restructuring profession in 2017. Experience however suggests that there will be many other changes which will emerge during the year.
Developments are awaited in ongoing court cases in relation to re-opening trust deeds and the effect of IVA discharges on PPI claims. Concerns remain about practices within the high volume IVA and trust deed market around equity and category 1 disbursements. These and other areas will undoubtedly shape the year ahead (and beyond), we just don’t know how.