Insolvency Technical Update - December 2017
Insolvency technical update – Your round-up of recent developments in insolvency
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Conversion from Administration to CVL
IPs are reminded that under the terms of paragraph 83 of Schedule B1 to the Insolvency Act 1986 as amended by the Small Business Enterprise and Employment Act 2015 (SBEE 2015), it is only permissible to move from administration to creditors voluntary liquidation where there is an expectation of a dividend being paid to unsecured creditors over and above that of a prescribed part distribution. The amendment made by SBEE 2015 (as a consequence of other changes which allow an administrator to make a prescribed part distribution without the consent of the court) restricting conversion to CVL to circumstances where there was a non-prescribed part distribution to unsecured creditors to be made, has only been commenced in England and Wales at this time.
In Scotland and Northern Ireland (under the equivalent provisions of Article 84 of the Insolvency (Northern Ireland) Order 1989, an exit from administration to CVL may only be made where there is an expectation that creditors will receive a distribution.
Where there is no expectation of a relevant dividend and an administration has been exited to CVL, office holders may wish to seek legal advice as to the validity of their subsequent appointment as liquidator.
A revised SIP 6 (E&W) - Deemed consent and decision making procedures in insolvency proceedings – has been issued and becomes effective on 1 January 2018. The revised SIP follows the issuing of an interim SIP 6 (E&W) and consultation earlier this year. Further details are available here.
A revised SIP 11 - Handling of funds in formal insolvency appointments – has been issued and becomes effective 1 January 2018. IPs should ensure:
- that in their practice, they have fully documented the financial controls and safeguards, including levels of insurance cover
- they have procedures to review the financial controls and safeguards at least annually
- that estate money is held in accounts which meet the account criteria set out in the SIP. Further details are available here
Insolvency Rules amendments E&W
Two new statutory instruments came into effect on 8 December 2017 making amendments to the insolvency regimes in England and Wales.
The Insolvency (England and Wales) and Insolvency (Scotland) (Miscellaneous and Consequential Amendments) Rules 2017 make minor corrections and clarifications which have been brought to the attention of the Insolvency Service since the new insolvency rules came into force in April 2017.
The Insolvency (Miscellaneous Amendments) Regulations 2017 ensure that the insolvency regimes for limited liability partnerships are brought into line with mainstream insolvency procedures, and with the recast EU Insolvency Regulation (848/2015).
They also bring insolvency regimes under the Insolvent Partnerships Order 1994 and the Administration of Insolvent Estates of Deceased Persons Order 1986 into line with the insolvency procedures that apply to other entities under the Insolvency (England & Wales) Rules 2016.
The Regulations withdraw Form 600 used to notify the Registrar of Companies of the appointment of a liquidator in a CVL and replace this with the content of a notice to be submitted to Companies House which will facilitate electronic filing. Companies House have published a new Form 600 (CH) which should be used to notify them of the appointment of a liquidator by the members or creditors.
Outlays in Protected Trust Deeds
The Accountant in Bankruptcy have published a Dear Trustee setting out their approach to outlays in PTDs following concerns about certain costs which trustees have inappropriately claimed as outlays. Trustees are informed of the actions AiB will take if these are identified. The letter also contains clarification in relation to ‘associates’ detailed in the Dear Trustee letter dated 29 March 2017.
Notifying HMRC in relation to CVLs
HM Revenue & Customs (HMRC) have announced new procedures to allow them to receive notification of deemed consent and meeting notifications in relation to CVLs. From 1 January 2018 all initial pre-appointment notifications for the deemed consent or virtual meeting procedures for CVLs should be sent to a designated HMRC mailbox (firstname.lastname@example.org). Further information is available here.
Funding the Accountant in Bankruptcy: consultation
The Accountant in Bankruptcy have launched a consultation on proposed changes to the fees payable to the AiB from 1 June 2018. The consultation closes on 12 March 2018.
Court Fee consultation
The Scottish Government have issued a consultation on Court Fees which would apply from 1 April 2018 to 31 March 2021. The consultation closes on 12 January 2018.
S & M Livestock Ltd (In liquidation) - A recent Judgment by Sheriff Jamieson at Dumfries Sheriff Court has provided some guidance on the scope of the role of a Court Appointed Reporter in assessing the remuneration of liquidators. A helpful summary of the court’s judgement is available here (via TLT Solicitors).