Communications under The Insolvency (England & Wales) Rules 2016
This article forms part of a series looking at the significant changes to insolvency procedures being brought in from 6 April 2017. In this article, David Menzies looks at the changes relating to the way creditors and others are communicated with.
The Small Business Enterprise and Employment Act 2015 introduced changes to the way in which creditors may be communicated with during an insolvency appointment. These provisions are given effect through the Insolvency (England & Wales) Rules 2016 (the 2016 Rules).
Provisions allowing the office holder to communicate electronically have been available since 2010. These allowed the office holder to communicate electronically where the intended recipient had consented to electronic delivery.
The 2016 Rules extend those provisions by allowing the office holder to communicate electronically with a creditor, where the insolvent and the creditor were accustomed to communicating electronically prior to the insolvency commencing, the creditor having deemed to have consented to electronic communication.
Part 1, Chapter 9 of the 2016 Rules deals with the delivery of documents and opting out.
The office holder must, in their first communication with a creditor, inform the creditor of their right to opt-out of further communications relating to the insolvency proceeding in question.
The communication must contain:
- identification and contact details for the office-holder;
- a statement that the creditor has the right to elect to opt out of receiving further documents about the proceedings unless—
- the Act requires a document to be delivered to all creditors without expressly excluding opted-out creditors,
- it is a notice relating to a change in the office-holder or the office-holder’s contact details, or
- it is a notice of a dividend or proposed dividend or a notice which the court orders to be sent to all creditors or all creditors of a particular category to which the creditor belongs;
- a statement that opting-out will not affect the creditor’s entitlement to receive dividends should any be paid to creditors;
- a statement that unless these Rules provide to the contrary, opting-out will not affect any right the creditor may have to vote in a decision procedure or participate in a deemed consent procedure in the proceedings, although the creditor will not receive notice of it;
- a statement that a creditor who opts out will be treated as having opted-out in respect of any consecutive insolvency proceedings of a different kind in respect of the same company or individual; and
- information about how the creditor may elect to be or cease to be, an opted-out creditor.
The office holder is required to treat a creditor as an opted-out creditor as soon as reasonably practicable after the creditor’s election to opt out is received.
The opt out will also apply in any consecutive insolvency proceedings under the Insolvency Act 1986.
Opt out exceptions
Notwithstanding that a creditor may have opted out of receiving future communications there are certain circumstances where the opt out does not apply. This includes:
- a notice which the Act requires to be delivered to all creditors without expressly excluding opted-out creditors;
- a notice of a change in the office-holder or the contact details for the office-holder;
- a notice as provided for by sections 246C(2) or 379C(2) (notices of distributions, intended distributions and notices required to be given by court order).
An opted out creditor must not only receive a notice within one of the above three categories, but must also receive any document which is required to accompany such a notice.
Provisions relating to the use of websites will be familiar to many office holders already. The 2016 Rules extend the provisions on notification of documents being available on a website to allow a general notification that documents and notices will be published on a website without further specific notification being made when the documents are made available.
There are, of course, the usual provisos that creditors can request hard copies of documents (individually, all currently available and/or all future documents). The general provision of making available without notification cannot be applied to documents which require personal delivery, a notice of intended dividend or documents which are not delivered generally (to member, creditors or contributories or any class of these).
Documents must remain available on a website for a period of at least two months following the end of the relevant insolvency proceeding or the release of the last office holder.
While clearly the general notification provisions are beneficial to the office holder and should cut down on costs associated with notifying creditors each time a document is made available on a website, it is unlikely to promote creditor engagement.
IPs and their firms will need to consider several matters to comply with the 2016 Rule requirements. This will include:
- considering, whether as a matter of policy or on a case by case basis, there is a need to identify potential recipients with which the insolvent has been accustomed to communicating with electronically
- considering how to collate and transfer the electronic delivery address relating to those where deemed consent can apply
- amending initial circular letters to include the required statements on creditor opt-out
- ensuring procedures are put in place to manage the provision of the information to creditors which come to light after the initial circular has been issued and during the insolvency proceedings
- ensuring procedures are put in place to ensure that opted-out creditors are recorded as such
- ensuring procedures are in place to ensure that opted out creditors are included in communications where legislation provides that the opt out does not apply
- where a consecutive insolvency process occurs but the office holder changes (for example, exiting administration by liquidation with the liquidator being different from the administrator), procedures should be put in place to ensure that information on opted-out creditors is received from the previous insolvency process office holder
- ensuring procedures are in place to record creditors who wish to receive hard copies of documents rather than access through a website, and ensuring that they are provided with future documents issued.