The New Insolvency Rules – Their Impact on Insolvency Practitioners, Directors and Creditors
The work of Insolvency Practitioners Will Continue to Evolve With the Introduction of the New Insolvency Rules
The arrival of the new Insolvency Rules for England and Wales, which came into effect in April 2017 are seen by some as evolutionary. Others think they are more revolutionary. It depends on your point of view, but one thing is for certain, all insolvency practitioners are working to get used to them – all 446 pages – and the proof of the pudding, as ever, will be in the eating. In this article we look at how the new insolvency rules will impact directors of companies facing insolvency, insolvency practitioners and creditors alike.
The New Insolvency Rules are Designed for the Digital Era
One of the main aims of the new Insolvency Rules is to bring the process of insolvency – which had been little changed for decades – into the digital era. The digital era has already been with us for c.20 years, so you might say the new rules are long overdue. However, in a highly structured and regulated industry such as ours, change takes time, but we can expect the changes to produce a speedier, nimbler insolvency process. For certain, the new rules will see the multitude of printed documents – especially creditors’ reports – that we are all used to, being replaced by email and password protected areas on the websites of Insolvency Practitioners.
The New Rules are expected to reduce the costs of communicating with creditors, amongst other things. Time will tell, of course. However, the new rules will have an impact on directors of companies facing insolvency, their accountants and also the creditors, as well as on the role of the Insolvency Practitioner.
The impact of the new rules for Accountants and their client directors seeking insolvency advice
On the plus side, the new rules mean that directors of insolvent companies will no longer be required to attend the S98 Creditors meetings. However, in keeping with the digital focus of the new rules (for greater speed) information is required to be produced at an earlier stage in the process than previously.
The impact of the new rules for Accountants and their clients who become creditors of insolvent companies
The new rules:
- Enable electronic communications with creditors, including emails
- Remove the automatic requirement to hold physical creditors meetings, although creditors will be able to request such meetings
- Enable creditors to opt out of further correspondence and for small debts to be paid by the office holder without requiring a formal claim from creditors
The underlying message of the new insolvency rules is to make the insolvency process more efficient and to encourage creditor engagement. A more efficient process should encourage a quicker process. Speed is essential when businesses are facing insolvency, as this increases the chances of business recovery rather than liquidation. Given the evolution in recent years in how Insolvency Practitioners are focusing more on saving insolvent businesses, if the new rules further help this evolution, they are to be welcomed.
Please contact us or call us on 0121 200 2962 if your business is facing insolvency. Our insolvency experts’ prime focus is always on helping businesses to recover and the sooner we are retained to do so, the more we can do to help.
