Insolvency legal updates

Opinion of Lord Hodge in the liquidation of quantum distribution (UK) limited

Recent Court judgement 

Insolvency practitioners need to give careful consideration on whether or not it is appropriate to engage the services of the solicitor acting for the petitioning creditor as is demonstrated by the Opinion of Lord Hodge in the Liquidation of Quantum Distribution (UK) Limited.  Lord Hodge remarked that insolvency practitioners are required to act in the best interests of the creditors as a whole. He was also concerned that the supervisory procedures of the court through the Court Reporter process had not been followed properly and requested that the Professional Bodies should bring the lessons of the case to the attention of their Members.

Housing (Scotland) Act 2010 - Insolvency appointments in respect of registered social landlords in Scotland


Although in the main insolvency remains a reserved matter for Westminster the Scotland Act 1998 (the Act) contains provisions which effectively allow the Scottish Government to legislate on insolvency when the "business association" relates to Registered Social Landlords (RSL). Insolvency Practitioners are aware that Housing is a devolved matter and therefore it is competent for the Scottish Government to enact primary legislation in relation to housing.

The aim of the legislation is to offer protection to the tenants of RSLs and to allow the Regulator to mount a rescue package which will safeguard the housing stock for the future.  The Regulator has statutory powers to direct a transfer of housing stock where appropriate to Another RSL.

RSLs will mainly be industrial provident societies though a number will be companies.  A Register of RSLs is maintained and can be accessed on the Scottish Housing Regulator's website.


Part 7 of the above Act, specifically S73 – Notification of step towards insolvency etc. contains a requirement on the following parties to notify the Scottish Housing Regulator both prior to taking the step and, (i.e. notification is required twice) as soon as reasonably practicable after as follows:

StepResponsibility for notifying
A step to enforce a security over a RSL's land  The person taking the step
Presenting a winding up petition of a RSL companyThe petitioner
Notice of the proposal of a resolution to wind upThe RSL
Applying for, or making, an administration order of a RSLThe person who applied for the order
Appointing an administrator to a RSL companyThe person making the appointment
This two stage notification applies to each party with responsibility for notifying the Regulator.

Failure to issue the required notification before a step is taken means that the relevant step has no effect therefore if an insolvency appointment is made it is imperative that the Insolvency Practitioner checks that the required notifications have been made, and checks the validity of the appointment before taking any other action.


As soon as a step is taken a moratorium on the disposal without the Regulator's consent, of land belonging to the RSL comes into effect. The moratorium ends 56 days after the second notification has been made to the Regulator under section 73(1)(b) unless the moratorium has been extended or cancelled. Where the consent of the Regulator has been obtained for the disposal a cancellation of the moratorium should be sought at the same time. This period can be extended by the Regulator. The moratorium does not prevent the appointment of an IP but it effectively limits his ability to act without the Regulator's consent. 


The detailed provisions are set out in Part 7 of the Act from Section 73 onwards. They include provisions whereby the Regulator may appoint an interim manager to carry out whatever functions are deemed necessary (other than the disposal of land) thus there could be another party acting for the business to which an insolvency practitioner has been appointed.  As the Regulator can make proposals about the ownership and future management of the assets the insolvency practitioner will need to work closely with the Regulator and with any interim manager.  Proposals will need to be agreed with the secured lender and the Regulator, and once they are agreed they are binding on all parties.


Insolvency Practitioners should take heed of the provisions of the Act so as to protect their positions in the event of being appointed to a company which is a Registered Social Landlord as failure to notify the Regulator calls into question the validity of the appointment and the ability to deal with the property or properties. Where appropriate separate legal advice should be sought.

Insolvency (Scotland) amendment rules 2010

New Insolvency (Scotland) Amendment Rules became effective from 30 May 2014. Click below to view more details.

 Insolvency (Scotland) Amendment Rules

Code of ethics for insolvency practitioners

The ICAS Code of Ethics has been revised and becomes effective from 1 June 2014. 

In Part D of the Code, which relates to Insolvency Practitioners, the only revision is that the Joint Insolvency Committee has removed the second sentence of paragraph 400.3. This is illustrated below. The text included in bold has been removed from the Code.

400.3 It is this Code, and the spirit that underlies it, that governs the conduct of Insolvency Practitioners. Failure to observe this Code may not, of itself, constitute professional misconduct, but will be taken into account in assessing the conduct of an Insolvency Practitioner.

You can view the Code by clicking on the link below.

ICAS Code of Ethics


  • Guidance
  • Insolvency

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