Northern Ireland Insolvency legislation changes
A package of changes to modernise and strengthen the insolvency process in Northern Ireland come into effect on 1 April 2016.
A significant number of changes come into effect on 1 April 2016 which will impact on insolvency practitioners and the insolvency regulatory system in Northern Ireland. The changes are being introduced through commencement provisions to the Insolvency (Amendment) Act (Northern Ireland) 2016.
Many of the changes bring into effect in Northern Ireland equivalent provisions to those introduced in England, Wales and Scotland in October 2015.
The main changes affecting insolvency cases will:
- allow liquidators to reach compromises over calls, debts and claims due to companies without having to seek sanction from the Court, creditors or company members.
- allows trustees in bankruptcy to refer to arbitration or to compromise debts and claims due to bankrupts without having to seek sanction from the Court, creditors or the Department of Enterprise, Trade and Investment (the Department).
- establishes criteria for deciding whether liabilities in tort are provable in bankruptcy, company liquidations and administrations and sets down rules for determining the date up to which debts incurred by companies which have successively been in liquidation and administration or vice versa are to be treated as debts for the purposes of the Insolvency (Northern Ireland) Order 1989 (the Insolvency Order)
- repeals provisions in the Insolvency Order under which arrears due in respect of a type of employee holiday scheme (which no longer exists) were to be treated as wages or salary.
- repeals Chapter 1 of Part 8 of the Insolvency Order which dealt with deeds of arrangement.
- amends Article 280 of the Insolvency Order to facilitate banks offering accounts to undischarged bankrupts. Changes to ‘after-acquired property’ in bankruptcy in will mean that if account holders withdraw funds, banks will be protected from recovery action by trustees in bankruptcy if they had not received specific notice that the funds had been claimed as part of the bankruptcy estate. As a result, trustees must ensure that they notify banks of a debtor’s bankruptcy as early as possible after the debtor has been declared bankrupt.
- amends Article 10(2) of the Insolvency (Northern Ireland) Order 2005 to make it possible for the Department to make orders enabling societies registered under the Credit Unions (Northern Ireland) Order 1985 as well as societies registered under the Industrial and Provident Societies Act (Northern Ireland) 1969 to enter a company arrangement or administration.
- amends Article 24(7) of the Insolvency (Northern Ireland) Order 2005 to create a requirement for the Lord Chief Justice to be consulted about the making of orders creating a right of appeal to a court in respect of discretionary decisions to disqualify bankrupts from offices or positions.
Authorisation of Insolvency Practitioners
A new regime will allow for the partial authorisation of insolvency practitioners. Insolvency practitioners will be able to be authorised in relation solely to companies, solely to individuals or to both (fully authorised - as is currently the case).
Strengthening the regulatory framework
Measures are also being introduced to reform the regulatory regime for insolvency with the aim of strengthening the regulatory framework for IPs, thus providing greater confidence in the insolvency profession.
For the first time a set of regulatory objectives for the insolvency regime is introduced.
- having a system of regulating IPs that secures fair treatment for persons affected by their acts and omissions, reflects the regulatory principles (transparent, accountable, proportionate, consistent and targeted only where action is needed) and ensures consistent outcomes;
- encouraging an independent and competitive IP profession where high quality services are provided at a fair and reasonable cost, where IPs act with transparency and integrity and consider the interests of all creditors in any particular case;
- promoting the maximisation of the value and promptness of returns to creditors; and
- protecting and promoting the public interest.
The Insolvency Order is also amended from 1 April 2016 to:
- introduce a range of sanctions (financial penalty, reprimand or revocation of status as an RPB) so that proportionate action can be taken where the Department is satisfied that a Recognised Professional Body (RPB) is not adequately fulfilling its role as a regulator,
- allow the Department to apply to court to directly sanction an IP where it is in the public interest, and
The regulatory objectives and sanctions apply for acts or omissions by RPBs in discharging their regulatory functions, or failure to comply with a new requirement, from 1 April 2016.
The power to apply to court to directly sanction an IP in the public interest applies to conduct on or after 1 April 2016, notwithstanding the date of appointment as office holder.
The Department will also be able to apply to court to secure compliance with a requirement that the Department has placed on an RPB.
A reserve power to establish a single regulator of IPs is also commenced.