Insolvency (Scotland) Rules: Statutory Declarations

An aim of the new Rules is to modernise the language of the statute. One of the terms that we wave goodbye to is affidavit, and in its place comes statutory declaration. The language might not be ancient Latin, but it’s still an old and well-established piece of statute that sits behind it, stemming as it does from the Statutory Declarations Act 1835.

A Statutory Declaration is a statement made in lieu of an oath and the Act contains a prescribed form of Statutory Declaration. A Statutory Declaration is included within the current standard form Notices of Appointment of Administrators and therefore a similar approach to the various documents which require a Statutory Declaration in terms of the New Rules seems reasonable. The following wording (amended to reflect the terminology used in the relevant Rule) can be inserted into the relevant document.

I [ ] do solemnly and sincerely declare that [the information provided in [this notice/this statement of affairs/statement of concurrence] is,] [these accounts are,] to the best of my knowledge and belief, [true][accurate and complete],

AND I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act 1835.

Declared at _________________________________

Signed _____________________________________

This ______________ day of ___________________ 20

before me __________________________________

A Notary Public or Justice of the Peace

It appears that a solicitor in Scotland is not authorised to take oaths as per s18 of the 1835 Act, and therefore any statutory declaration should be signed in front of a notary public or justice of the peace. If any doubt as to your requirements, take independent legal advice.

How we can assist you

We’ve been examining in detail the new legal requirements and their practical implications. We can offer bespoke in-house training, Rules-compliant document packs and checklists, and compliance support.

For further information about how we can assist you in adjusting to the changes brought about by the new Rules, contact

Insolvency (Scotland) Rules: Nomination Process

The new Rules will come into force on Saturday 6 April 2019. We will be keeping you posted where we can on interpretations and issues in the period of their introduction.

First up, we’ve walked through the nomination process to have a look at the timescales involved where an interim liquidator, appointed on 8 April 2019, seeks and obtains one nomination as liquidator, and goes back to the creditors for a decision by way of deemed consent. We have assumed that the interim liquidator in this example issues notices at the last possible occasion, and uses 2nd class post wherever possible. The table below outlines what we think that process looks like.

Event Date or deadline Statutory Reference Narrative
Winding Up Order (WUO) Monday 08/04/2019 S138 Must as soon as practicable seek nomination within 28 days beg within WUO.  Therefore 28 days in this example expires on Sunday 5 May. It’s possible that that RPBs may take view on an  IL always sending out at last possible time given s138 requires nominations as soon as practicable.  Can ignore Easter bank holidays, since requirement is 28 days (not business days) from WUO.
Last date for posting report and nomination request: using 2nd class post 29/4/2019 R1.38 Deemed to have been delivered 4 business days after the date of sending.


Last date report and notice can be received by creditors Friday 3/5/2019 Report and nomination notice received by creditors on Friday (since Sunday  not a business day)
Nominations received from Creditors Mon 13/5/2019 R5.22(5) Has to be received within 5 business days of the date of the notice issued requesting nominations (if they are sending it 2nd class, they would have to post it Tues 7th May latest (since Mon 6th May is a Bank Holiday) to ensure received by IL in time)
Decision date expiry Monday 3/6/2019 R5.22(9) The decision date has to be no later than 21 days after the date of receiving nominations – nomination date 13/5/2019 + 21 days = Monday 3 June 2019 (can ignore bank holiday on 27 May since Rules refer to 21 days and not business days).
Therefore, latest date for issue of circular, giving a minimum of 14 days’ notice, to include 2 business days for 1st  class.  (note posting 2nd class here doesn’t give enough clear notice) Wed

15/5/2019 deemed to be delivered Fri  17/5/2019 at latest)

R5.22(10) Giving at least 14 days’ notice + 4 business days for 2nd class post not to include the date of delivery and the date of the decision. (Rule 1.3)  In effect, on the next business day following the expiry of the nomination period, using 2nd class post doesn’t allow 14 clear days’ notice of the decision to be issued – since Rule 1.3 defines clear days not to include the date of sending or the date of the event.  On this occasion, looks like you are going to have to use first class post.
Last date for creditors to exercise 10:10:10 objection and request a physical meeting Fri 24/5/2019 R8.8 Creditors may within 5 business days from the date of delivery of the notice require a physical meeting to be held. The convenor then has 3 business days from the threshold for requests being received to send notice in accordance with the Rules, giving creditors 14 days’ notice of the meeting. That would have to take into account the bank holiday on Monday 27 May.
Latest date for decision (the backstop) Thu 6/6/2019 R5.22 (7) where a decision is sought under r5.22(6) the decision date must be not more than 60 days from the date of the winding up order.

Most of you will have diary systems and prompts to assist you with the planning of your processes. However, this exercise demonstrates that you can’t leave everything to the last minute and issue by 2nd class post. You simply won’t meet your deadlines.

This is a good example of why putting everything on a website going forward will be advantageous, and understanding the implications of delivery (rather than sending).

How we can assist you

We’ve been examining in detail the new legal requirements and their practical implications. We can offer bespoke in-house training, Rules-compliant document packs and checklists, and compliance support.

For further information about how we can assist you in adjusting to the changes brought about by the new Rules, contact

Common Ground: Insolvency (Scotland) Rules 2018

The new Scottish corporate insolvency rules will come into force on 6 April 2019. At the same time, the final suite of changes to Scottish specific elements of the Insolvency Act 1986 will be enforced with the commencement of the Public Services Reform (Insolvency) (Scotland) Order 2016.

Two sets of Rules

Due to a partially devolved corporate insolvency regime, Scotland’s new corporate rules are found in two pieces of secondary legislation: The Insolvency (Scotland) (Company Voluntary Arrangement and Administration) Rules 2018 and the Insolvency (Scotland) (Receivership and Winding up) Rules 2018 (“the new Scottish Rules”). Together, they will bring Scotland’s corporate insolvency regime broadly in line with England and Wales from 6 April 2019. But not entirely. Certain aspects of the Scottish procedures will remain distinct – for example accounting periods and remuneration approval processes. It is also worth noting that the new Rules in Scotland have no impact on personal insolvency, which continues to be subject to the Bankruptcy (Scotland) Act 2016.

Decisions, decisions…

Scottish IPs are now getting to grips with provisions familiar to our English cousins: the restriction on an officeholder’s ability to hold a physical meeting of creditors, and the move to decisions of creditors by deemed consent (where available) or by one of a number of prescribed decision procedures: correspondence, virtual meeting or electronic voting, with physical meetings available only where requested by the requisite number or value of creditors (the 10:10:10 rule).

The good news for practitioners dealing with Scottish appointments from 6 April 2019 is that a lot of creditors and stakeholders will be familiar with the decision-making process already. On the other hand, if the English experience is anything to go by, it won’t necessarily increase engagement and deemed consent will be the default process.

Consolidation or duplication?

One of the driving principles behind the new Rules North and South of the Border was to consolidate 32 years of amendments to statutory instruments since the existing Rules came into force in 1986. The new Scottish Rules contain impressive lists of revocations, but also a fair amount of duplication across both sets. Part 1 of each of the administration and liquidation Rules defines scope, times and documents. Decision making, proxies and corporate representation, the EU regulation, and block transfer of proceedings also enjoy commonality, but under different section numbers in each set of rules.

Those familiar with the 1986 Scottish Rules will know that currently the Administration rules rely heavily on the Liquidation Rules for their provisions. The new Administration Rules no longer do so, and the process is set out in detail in Part 3 of the new Rules. The process for a CVA is similarly detailed in Part 2. There is an extension, rather than contraction, of the Scottish Rules pertaining to Liquidation. Part 4 of the existing 1986 Rules applies to Court Liquidation, and then Schedules 1 and 2 set out how Part 4 applies to CVL and MVL (if at all, in the case of the latter procedure), but each of these liquidation processes now has a dedicated part in the new Scottish Rules.

CVL in Scotland

The CVL entry process will once again be common across the UK. Directors North and South of the border will seek a decision from creditors as to their preferred liquidator and gone will be the costly statutory advertising requirements and personal attendance at a section 98 meeting that, post-2017, survived in Scotland only. This provides a level playing field for all IPs, wherever they are located, and widens the choice of IP firm from a director’s perspective.

Court Liquidation

As you know, there are a lot of distinct Scottish terms – gratuitous alienation, for example! Here is another one: “guddle”, meaning muddled or messy. To use it in a sentence, one might say ‘the new court liquidation process to appoint a liquidator is a bit of a guddle’.

In their capacity as interim liquidator IPs will need to seek a nomination as liquidator from creditors, and if no nomination is provided, will revert to the relevant court to seek confirmation in office as liquidator. That’s the easy bit, which has not significantly changed from the 1986 provisions.

If, however, a nomination (or nominations plural) is received, the IP must go back to creditors with a decision-making procedure for appointment. If only one nomination is made (presumably for the interim liquidator to continue as liquidator), then a deemed consent procedure could be used. If two or more nominations are received, a decision by correspondence or virtual meeting is the next logical step, but the Rules are not explicit. Practitioners therefore need to give some thought to the situation and which procedure best suits. The standard appeals (10% in value to deemed consent) and the 10:10:10 Rule in relation to physical meeting requirements apply, so it could be possible, in a contentious liquidation, for deemed consent to lead to a decision procedure, but still end up in a physical meeting. The familiar (and comfortable) court liquidation process has been up-ended. Deep breath everyone!

Liquidation process

Where commonality does feature, it relates to the post- appointment liquidation process. Part 7 of the Liquidation Rules sets out how accounting periods, progress reports and final reports will apply in future, and from what date retrospectively. As a rule, the start date for progress reports in a CVL will be the date of the appointment of a liquidator and in a court liquidation it could be variously the date of the appointment of the provisional liquidator (if there is one) or the appointment of the interim liquidator in all other cases.

Relevant date for claims

Another surprise is the relevant date for claims moving from the date of the presentation of the petition in court liquidation to the date of the winding-up order. The definition of relevant date is unhooked from s129 and instead attached to the definitions in s247 of the Insolvency Act 1986. Given too that the appointment of a provisional liquidator is more prevalent in Scotland, IPs should think carefully about the consequences of their actions in the period of provisional appointment.

Remuneration and accounting periods

As those of you dealing with Scottish cases know, the process for obtaining approval for remuneration is distinct from England and Wales and invariably involves the court. The remuneration approval process will remain largely unaltered, which limits the impact of the decision-making procedures when compared to England and Wales.

A more welcome revision may be the changes to the operation of accounting periods that allow an IP to manage accounting periods, albeit with court or committee approval. The first two six-month accounting periods will remain, but thereafter a practitioner can defer a claim for remuneration without court or committee approval.

MVL in Scotland

So how does the MVL process fare in the new Rules shake-up? The good news is that the entry process remains unchanged North and South of the border. Statutory interest is now consistent – both in terms of amount and application, but will automatically apply in retrospect to MVLs open at 6 April 2019. IPs need to review cases now for outstanding creditor claims and ensure that where these, and the corresponding statutory interest burden, might be material, they are paid in full before 6 April. If that is not possible, then shareholders need to know the quantum of back-dated interest that’s going to impact on their capital return. You may also need to dust down some indemnities as well.

From 6 April 2019, the statutory rate of interest in corporate insolvency in Scotland will reduce from 15% to 8%, (in line with the judicial rate and the applicable rate in personal insolvency in Scotland) and applies in MVLs, which is not the case under the 1986 Rules. Schedule 2 of the 1986 Rules specifically doesn’t apply Rule 4.66 and 4.67 to MVLs. Scottish IPs contemplating an MVL immediately post 6 April 2019 need to be mindful that statutory interest will apply and deal with the payment of pre and post appointment corporation tax accordingly.


For the reasons set out already, the biggest change to the Administration Rules is their length. The 1986 Liquidation Rules, on which Scottish administrations relied, have been written out in full in the new Administration Rules – for example Creditors’ Committees and Claims. The Scottish Administration Rules are the closest to their English equivalents, but it is disappointing to see some of the glitches arising from the English provisions being imported directly into the Scottish Rules – specifically, listing the date and time of appointment in the proposals and notice documents. There are also duplicate, but conflicting, Rules on the order of priority. Watch out for more guidance on these areas in the coming months.

Key steps for your practice

Your geographical location, and your familiarity with the English Rules, will dictate how much preparation your practice requires for the introduction of the new Scottish Rules. You may already be familiar with the changes that the new Rules are bringing, or you might need training and guidance on their introduction and implementation.

You will need to amend your document packs to reflect new standard contents. You will also need to consider what form of decision procedure will be appropriate for the size and nature of the cases you administer and think about which platform best suits a virtual meeting provision. Consider too the benefits and opportunities presented by these changes in terms of cost saving to how you operate, particularly surrounding the use of websites as a principal form of communication with creditors.

For further information about how we may assist you in adjusting to these changes, contact:

First published in the Spring 2019 edition of RECOVERY magazine and reproduced with the permission of R3 and GTI Media.


The new Insolvency (Scotland) Rules 2018 are finally here!
Due to commence on 6 April 2019, now is the time for familiarisation, planning and preparation. Here’s how we can assist you.

Common Financial Tool (Scotland) Regulations 2018 – Giving evidence to Parliament

Eileen Maclean, R3 Scottish Technical Committee member, gave evidence to the Scottish Parliament Economy, Jobs and Fair Work Committee, on the new Common Financial Tool (Scotland) Regulations 2018 on 30 October.

Eileen said: “It was a privilege to be asked to give evidence on behalf of the profession. Now we await the Committee’s recommendation, with interest.”

You can watch the session here:


Lifting the corporate veil

It seems that the protection afforded by Limited Liability has received a body blow in the Budget with an announcement that directors may face personal liability for their company’s tax liabilities:

“Tax abuse and insolvency – Following Royal Assent of Finance Bill 2019-20, directors and other persons involved in tax avoidance, evasion or phoenixism will be jointly and severally liable for company tax liabilities, where there is a risk that the company may deliberately enter insolvency. (69)”

The language is perhaps a little confused. Insolvency is, after all, a measurable financial position, defined in statute with reference to two established tests, so not something that is “deliberately” entered, per se. It’s also not entirely clear which company is being referred to – the one with the liabilities or the successor. At a guess, the provisions are aiming at behaviours that cause or contribute to the insolvency of a company, but viewed with hindsight of an insolvency proceeding.

But leaving aside the semantics, there could be some significant and tangible impacts for business owners looking to avail themselves of the entrepreneurial encouragement to “have another go” that Limited Liability is intended to afford. Whilst there is no great surprise that tax evaders should be targeted, interestingly, both avoidance and phoenixism (like them or not – both currently legal practices), appear to be encompassed also.

We will have to await further details before the impact of this on the advice provided to directors of insolvent companies can be fully assessed. However, if the trigger for personal liability is the act of starting again (i.e. phoenixing), these provisions may have the unintended consequence of discouraging business restarts at a time when the economy is likely to be sorely in need of them. They may also impact the saleability of distressed assets, where often a connected party is the only interested purchaser. If such a purchase risks the imposition of personal liability for the debts of the predecessor company, the well-advised might reasonably look to buy their stock and fixtures and fittings elsewhere, or at the very least, be willing to pay rather less for them!

Alison Curry
Director, Insolvency Support Services 

Technical note: state pension

We were asked recently whether, if a debtor is at state pension age but is still working and therefore obtaining an income, they have to claim their state pension because they are eligible for it, or are they able to defer claiming it until after they have finished working?

The answer is yes, they can defer.  Guidance can be found at

When the individual does eventually claim they can get the missed payments back as higher weekly payments or a one-off lump sum.

It is our view, particularly as state pension isn’t paid automatically – you have to actively claim it, that in line with the guidance provided by Horton v Henry, the Trustee would be unable to compel the debtor to claim their pension if they choose not to.

New Scottish Bankruptcy Book

Published at the end of last year, this new text takes the place of the classic work of McBryde on Bankruptcy. Authored by Donna McKenzie-Skene, this book is the most up-to-date work on bankruptcy in Scotland. You can buy your copy here:

Rescue Remedies Q&A

Eileen Maclean, a director of Insolvency Support Services, was interviewed by business journalist Ian Harper for his Rescue Remedies feature on the Insolvency and Corporate Recovery market in the latest issue of CA Magazine from ICAS.  Here are Ian’s questions and Eileen’s answers.


IH: What would insolvency practitioners like to see Anna Soubry (the newly appointed minister with responsibility for UK/England & Wales insolvency policy) tackle as a matter of priority?

EM: Single issue licensing – we need to know what is happening and when.  Personally I think that this is a positive contribution to the insolvency regime, although I appreciate many do not, but the current uncertainty as to its introduction and its operation need to be addressed. We have an opportunity to work together to create change for the benefit of creditors, debtors, companies and consumers, to ensure that we have a licensing regime fit for purpose and that all stakeholders support.


IH: What are insolvency practitioners keen for Anna Soubry not to change?

EM: I think that a period of consolidation is in order.  We have had change on so many fronts that a period of reflection and feedback on the various changes would be welcome!  The one exception is a proposed consultation on employee claims.


IH: Following the Citylink collapse, MPs have called for tougher sanctions on company directors to protect staff and creditors. Do you think tougher sanctions are appropriate or necessary, and what changes would you like to see implemented as a result of this collapse?

EM: I would welcome a period of consultation on  employees’ positions in insolvency.  A lot of the criticism in City Link came about because self-employed contractors lost out on the administration of the company, and the self-employed are not automatically classed as employees. Given the changing nature of work in the 21st century, i.e there are more self-employed contractors in many sectors these days (whereas in the past it might have been more limited to oil & gas, IT etc). I think that there is a debate around the changing nature of work and workforce composition, and there is perhaps an argument for widening the definition of “employee” on insolvency.  However, any such changes would impact on employment law generally, so this would need to be carefully considered.

There are various sanctions against directors available to the IP and set out within the existing insolvency legislation (Insolvency Act 1986) (e.g. recovery from directors personally via actions for misfeasance, wrongful and fraudulent trading) as well as the ability to limit directors’ activities via the directors’ disqualification regime.  However, there are often few assets in a case to fund litigation, or no appetite among creditors to finance an investigation or recovery action with no guaranteed outcome.  Rather than bring in tougher sanctions, perhaps setting up some form of funding scheme that would allow IPs to run the action with sufficient support (particularly since the IP exemption for 3rd party funding is due to be reviewed again)? Regarding the disqualification regime, it needs to be properly funded.  There is no point bringing in ever more legislation to address any perceived problem, without equivalent funding.   That’s just ticking the “policy achieved” box.


IH:  How is the new regime on ‘prepacks’ (following the report by Teresa Graham) working out in practice? From the experience to date, what are the good points about the new regime and what are the bad ones?

EM: Not hearing many grumbles or comment on the grapevine.  The perception is that this another “policy achieved” tick box exercise. Perhaps of more relevance to creditors generally is the “phoenix” operation that springs up, and as part of the Disqualification regime, or indeed HMRC could have a wider role to play in policing the directors’ business activities post insolvency.   But that requires funding.  And a more joined up approach from government generally.


IH: Following the announcement by Business Minister Jo Swinson on 3 March, insolvency practitioners in England & Wales are now required to provide upfront estimates of the cost of working on insolvency cases, so ending the uncertainty of unlimited hourly charges. What has the effect of this been in practice?

EM: In Scotland, we have always had a more transparent approach to fee setting and approval.  We do not currently have equivalent corporate provisions.  We do have them in our PTD regime, and it has allowed creditors to see, and if necessary, to challenge the expected costs at the outset. However, we have to find a balance, and creditors constantly need to be reminded that not all of our impact is measured in dividend returns: for example, processing employee claims, ensuring third party assets are returned safely, credit insurance claims are facilitated.


IH: Regarding insolvency practice north of the border, what do you believe are the pressing issues that need to be resolved in Scotland?

EM: We need clarity and careful consideration of the Corporate Insolvency Rules.  While we have always had separate Rules in recognition of our distinct jurisdiction, we are now at very disparate legislative positions.  Given the work and time taken to get the English rules to their current position, I would not want to see a quick “cut and paste” into Scottish legislation.  We also need our policy makers north and south of the border to be quite clear about their intentions, and again, that’s a debate we should all be part of.


IH: The number of company directors disqualified by Insolvency Service rose by 83% to 119 in the past year. Jeremy Willmont, head of insolvency at accountancy group Moore Stephens, was quoted by the Daily Mail as saying: “While it’s great to see more criminal directors banned from running firms, there’s a feeling a number are slipping through the net due to lack of resources at the Insolvency Service.” What is your view on this – do you agree with Mr. Willmont that the Insolvency Service is under resourced?

EM: I totally agree. The Government needs to be clear on its priorities and policies.  If public and SME protection is an important aspect of the UK business environment, and a stated government policy, then a robust, properly funded disqualification regime has an important role to play in policing UK commercial activity.  Without it, and without equivalent supporting powers to investigate and curb commercially dangerous behaviour,  any risk in business transfers to the customer or the creditor, with no responsibility for good behaviour required of directors.


IH: What other issues would you like to raise regarding the current state of the insolvency regime in the UK?

EM: We , media, IPs and government, have a role to play in making sure that our contribution to the economy, and the complexities of what do, are understood and valued.


CA Magazine’s Insolvency and Corporate Recovery feature is included in the September 2015 issue.

Bankruptcy and Debt Advice (Scotland) Act 2014 – the story so far

BADAS, as it was inevitably going to be known, came into effect on 1 April 2015, to much fanfare from the Scottish Government, and some groaning from the profession.  Was yet more change really required? So, what’s happened in the first few months of the new Act, and what should we as a profession be looking out for further down the line?

At the time of writing, the Accountant in Bankruptcy has just released its statistical analysis of Quarter 1 appointments under the new regime.  It is clear, comparing these to the statistics for the preceding Quarter 4, the last under the 2008 statutory regime, that debtors and their advisers voted with their feet and the Accountant in Bankruptcy saw a deluge of debtor applications in that final quarter.  Debtors opted for a short period of acquirenda and a three year period of contribution rather than the increased four (on both counts) and, I suspect in some cases, the flexibility of a contribution set in agreement between the debtor and Trustee, rather than the now compulsory framework of the Common Financial Tool or Statement.   The new Minimal Asset Process (MAP), designed to replace LILA (Low Income Low Asset) as an entry route, but with the revised “sequestration lite” approach which was always missing from LILA, has been slow to take off, but the Accountant in Bankruptcy is expecting the MAP sequestration process to become more popular in due course. Newly announced UK Government policies on welfare and tax credits may also play a role in an increased uptake.

The requirement for mandatory money advice pre-application and the setting of a Debtor Contribution Order up front, have placed a significant burden onto the money adviser before sequestration is awarded.  A lack of anecdotal evidence surrounding these processes suggests that most of us acting as money advisers are getting it right.    Internal restructuring to deal with the increased administrative burden at the Accountant in Bankruptcy, from which Scottish Courts have been relieved, is also complete, and will be tested as sequestrations awarded under the new legislation increase in number and complexity.

Another welcome change is the ability to shorten the first accounting period to six months, effectively reinstating the pre 2008 position.   While designed to allow early distributions in cases with significant funds, it will also facilitate a degree of working capital management.

The great unknown at the moment is the impact of the changed discharge procedure, which is no longer automatic, and has to be actively applied for by the Trustee.  We will need to wait and see what the practical implications of these changes are, one year from now.

And dare I say it, there would appear to have been a missed opportunity.  There has been no wholesale consultation on the role of the debtor’s family home in sequestration, or an attempt to straighten out the exemption provisions for the debtor’s dwelling house in protected trust deeds.  Next time perhaps?


Eileen Maclean, Director, Insolvency Support Services

This article first appeared in Insolvency Practitioner, IPA, September 2015