MVLs in Scotland – the law of unintended consequences?

Eileen Maclean has been hot on the heels of the new Insolvency (Scotland) Rules and suggests there could be risks for liquidators and members in MVLs.

Scotland’s new corporate insolvency Rules, the Insolvency (Scotland) (Company Voluntary Arrangement and Administration) Rules 2018 and the Insolvency (Scotland) (Receivership and Winding up) Rules 2018 (the new Scottish Rules) come into force on 6 April 2019.

Since their publication, we have been poring over them. We’ve had a good look at MVLs under the new Rules and highlight some potential issues in this article – not all of them necessarily intended by the Rules’ creators. No doubt as issues arise and are considered, practice and interpretation will develop. But as things stand, what are we faced with?

Transitional and savings procedures

The new Scottish Rules apply to cases open at 6 April 2019, save for any express transitional or savings provisions. Very few apply to MVLs.

Part 4 of the current 1986 Scottish Rules only applies to MVLs as specified in Schedule 2. Part 7 of the new Scottish Rules states that it ‘applies in winding up’. No definition of ‘winding up’ is given, but some Rules in Part 7 clearly refer to MVL, CVL or WUC. Generally, therefore, Part 7 applies to all processes, solvent or insolvent, voluntary or compulsory.

What does that mean in practice? Statutory interest will apply from 6 April onwards, when currently it doesn’t, to both existing and future cases. Statutory processes that previously did not apply to MVLs, eg accounting periods, will do so going forward and, in the absence of any savings provisions, for existing cases too.

Creditor claims

Where a liquidator in an MVL is dealing with creditor claims, the accounting period process specific to Scotland now applies, with all its attendant deadlines. The first accounting period is six months and cannot be shortened. Part 7, Chapter 4 Claims by Creditors now applies (which makes sense – why have a different basis of calculation in an MVL). R7.32 Payment of Dividends states that on the expiry of the appeal period (or the final determination of the last such appeal) the liquidator must pay to the creditors the dividends in accordance with the scheme of division. The small debts provisions at R.34 apply.

Any liquidator dealing with a claim now must do so within the context of the Rules. Claims by creditors must be submitted in terms of R7.16 not later than eight weeks before the end of an accounting period. The liquidator adjudicates per R7.19 and must, not later than four weeks before end of the period, accept or reject the claim. Creditors then have a right to appeal to the court not later than 14 days before the end of the period. These time limits can be varied by the court per R7.31(2)(c )(ii) (there won’t be a liquidation committee in an MVL). Alternatively, the liquidator could apply to court to set an earlier last date for claims per S153 of the Insolvency Act 1986.

The way the new Rules apply, it will in practice shift the onus onto the directors to make sure that creditors are paid pre-appointment.

While there might not be many MVLs where the liquidator is dealing with creditor claims, there will be some. And the way the new Rules apply, it will in practice shift the onus onto the directors to make sure that creditors are paid pre-appointment.

Statutory interest

R7.27 Order of Distribution imports statutory interest into MVLs where currently there is none, albeit the rate in Scotland drops to 8% from 15% on 6 April 2019. It makes sense that statutory interest applies consistently to MVLs UK-wide, and the approach to minimising statutory interest on corporation tax is back to being a UK one. Again, there are no savings provisions here, so interest now appears to apply in relation to MVLs open as at 6 April 2019. On the bright side, future debts provision for discounting at the official rate back to the date of liquidation is now included to all winding ups in R7.22.

What this potentially means in practice

  • Directors must ensure that all outstanding liabilities of the company are paid pre-appointment and, if not, members need to understand that there is a potential statutory interest liability (of up to six months).
  • Possible court application post-appointment per S153/R7.31 to deal with claims in shorter timescales than those set out in the Rules.
  • Unless there is active management of the timescales in R7.19, creditors will have to wait to get paid, assuming no appeal to an adjudication, until no earlier than 14 days before the end of the first accounting period. That entitles them to approximately 5.5 months of statutory interest as a result. That will be material in some cases, not in others. The cost of making an application to court may be worth it in some cases, but not in others.
  • Where you have a significant exposure to statutory interest in an ongoing MVL, consider paying creditors before 6 April 2019 (and use s153 accordingly).

What was previously a straightforward process now seems overly complicated, and rather goes against the spirit and intention of the new Rules.

All of this raises issues of risk for MVL liquidators and additional cost for members, where creditors have not been paid in advance of appointment. What was previously a straightforward process now seems overly complicated, and rather goes against the spirit and intention of the new Rules.

Insolvency Support Services have been examining the new legal requirements and their practical implications at a series of courses, which we can offer as bespoke in-house training, and will be providing document packs and compliance support.

For further information about how Insolvency Support Services can assist you in adjusting to these changes, contact: enquiries@insolvencysupportservices.com

 

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

We’re speaking at R3’s Series of SPG Technical Reviews

Insolvency Support Services’ Eileen Maclean and Alison Curry are looking forward to speaking at R3’s series of SPG Technical Reviews, specifically designed for insolvency and restructuring professionals in small and medium-sized practices, in the next few months.

Their practical, focused sessions will cover the new Scottish Insolvency Rules, highlighting key changes and differences to the current England and Wales Rules.

Want to know what has changed and why? You can catch Eileen at the R3 SPG Technical Reviews in Birmingham (26 February) and Leeds (30 April) and Alison in London (14 February) and Exeter (9 May).

For more information and to book, click here.

If you need more than an overview and would like to book one of our half day courses on the new Scottish Rules, click here for more information. We’ve also added an extra Edinburgh course on 19 February due to demand. Booking is straightforward: contact Danielle Kelly and the ISS Training courses team on 0845 601 7570 or on courses@insolvencysupportservices.com.

 

Insolvency (Scotland) Rules 2018 – are you ready?

The long-awaited Scottish Rules are here!

Two sets of Rules

Due to the nature of the partially devolved corporate insolvency regime, Scotland’s 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”) were laid last month and will bring Scotland’s corporate insolvency regime broadly in line with England and Wales from 6 April 2019. Are you ready?

Decisions, decisions…

Perhaps the most significant change is the restriction placed upon an office holder’s ability to hold a physical meeting of creditors. Decisions of creditors are to be obtained using either deemed consent (where this is 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).

Practitioners South of the Border have got to grips with these new requirements over the last two years, but not without some teething pains. Concerns remain about verifying the identity of a participant in a virtual meeting, and the potential implications of a person being excluded because of a technological failure. Perhaps counter-intuitively, it seems removing the requirement of a physical meeting has not increased creditor engagement.  But the good news for practitioners dealing with Scottish appointments from 6 April 2019 onwards, is that a lot of creditors and stakeholders will be familiar with the decision-making process already.

Effects of the new Rules

  • Consolidation: There have been 32 years of amending statutory instruments since the existing Rules came into force in 1986 and the new Scottish Rules contain impressive lists of revocations. In theory, the new Rules should be easier to use, once bedded in, though there will undoubtedly be a steep learning curve at the outset.  Have your destination tables to hand!
  • Future proofing: By describing what needs to go in a notice, report or return, rather than prescribing a particular form, the new Scottish Rules aim to reduce the need for statutory forms and amending statute for alteration. This approach is intended to provide more flexibility, though has resulted in the inclusions in the Rules of lengthy lists of standard contents. Your standard documents and notices will need to be reviewed and amended.
  • Modernisation: The language has been modernised and made gender neutral, in accordance with current drafting practice. The definitions applied by the Rules mirror those used in the England & Wales Rules broadly although there are some small (and noteworthy) variations. Where possible, the new Scottish Rules adopt a “common parts” approach with the aim of reducing repetition and unnecessary divergences between procedures.
  • Cost reduction and improved engagement: Ultimately, the new Rules give effect to the policy changes which resulted from the UK Government’s Red Tape Challenge initiative. Reducing unnecessary meetings, providing for opting out and allowing small claims to be admitted without a statement of claims are all intended to reduce cost and improve creditor engagement.

Remuneration and accounting periods

As those of you dealing with Scottish cases know, the process for obtaining approval for remuneration is distinct from England & 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 & Wales.

A more welcome revision may be the changes to the operation of accounting periods that allow an IP to manage accounting periods without 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.

Key steps for your practice:

  • Gain familiarity with the new Rules at an early stage – come on one of our courses!
  • Review files for application of transitional and savings provisions
  • Amend document packs to reflect new standard contents – we can assist with packs
  • Consider what form of decision procedure will be appropriate for the size and nature of the cases you administer
  • Consider the benefits / opportunities presented by these changes in terms of cost saving to how you operate

We will be examining the new legal requirements and their practical implications at a series of courses running throughout January and February 2019 and providing document packs and compliance support.

For further information about how ISS may assist you in adjusting to these changes, contact: enquiries@insolvencysupportservices.com

 

INSOLVENCY (SCOTLAND) RULES 2018

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.

Intensive Insolvency CPD / CPE Catch Up Course

Looking to catch up on your CPD? It’s that time of year when we submit our licence applications and sign off that we have fulfilled our CPD obligations.

Join fellow professionals and the ISS Training team for an intensive two days and 12 hours of CPD / CPE in advance of your annual licence renewal.  It is only £495 plus VAT for the two days.

This course will cover key compliance areas for all insolvency professionals and provide optional streams to cater for the types of work your practice undertakes.  Choose the stream that suits your business and development need.  Delivered in a group, interactive format, you will have an opportunity to discuss with peers the issues you’ve encountered in practice and pick the brains of our compliance experts, Eileen Maclean and Alison Curry.

CPD Learning Outcomes

  • Clear and concise guidance to legislative and regulatory requirements governing each area
  • An opportunity to discuss current issues and best practice with fellow professionals
  • 12 hours of bespoke and relevant CPD/CPE to support your annual license renewal

Who should attend

This course is aimed at licenced Insolvency Practitioners and their staff, who are looking for a comprehensive introduction to the subject matter or an update to their technical knowledge and skills.

Speakers

Eileen Maclean MA Hons MIPA MABRP MBA, director of Insolvency Support Services Limited

Alison Curry LLB Hons MIPA, director of Insolvency Support Services Limited

Location and Date

Manchester, 21/22 November, 9.30am to 5.00pm

London, 5/6 December, 9.30am to 5.00pm

Cost

Half day course: £155 + VAT
Full day course: £295 + VAT
All four half day courses: just £495 + VAT

Fees include all course documentation, lunch and light refreshments

CPD

3-12 hours depending on modules attended

Course Outline

Day 1

Session 1: Know Your Customer:  Systems & Procedures Workshop
How you can improve your firm’s KYC in a cost effective and proportionate way to manage the risks presented by conflicts of interest and the AML regime.

Session 2: SIPs Update
Refresh your knowledge of these key regulatory requirements.

Session 3:
Choose from:

Option A: Current issues in IVAs
Join Alison for an examination of the current regulatory focus and developments in IVA practice.

Or 

Option B: Current issues in MVL
Eileen presents an overview of the particular risks incumbent in MVL work and how these can be effectively managed.

Day 2

Session 1: Understanding Vulnerability
Vulnerability, and particularly the impact of mental health problems, has never been higher profile. Consider what adjustments your business operations require, to assist your clients and avoid adverse PR.

Session 2:
Choose from:

Option A: Bankruptcy Update
Alison leads the discussion on how practice within the Official Receivers is developing and examines the real impacts of bankruptcy on those you assist with their debt situation.

Or

Option B: Sectoral Challenges
With retail failure seldom out of the news, the hospitality sector struggling to recover its footing and the construction industry facing faltering house prices, Eileen will look at some sector-specific challenges faced by UK businesses and the owners and creditors you advise.

Session 3: Data Privacy Workshop
Data privacy cuts across all areas of practice management. Understand what steps you need to take, both as an insolvency professional and as a business person.

 

CPI and CPPI exam success for ISS Training students

ISS Training is delighted to congratulate its CPI and CPPI students on their success in the June 2018 CPI and CPPI exam sitting.  Our students achieved great results, including one distinction and three merits, and we are thrilled that all of their hard work paid off.  Well done, class of 2018!

Enrolment for the 2019 session is now open. For full details of the classes and dates for CPI click here and for CPPI click here.

If you would like to discuss your options, please speak to us at any time on 0845 601 7570 or courses@insolvencysupportservices.com

Extensive new training programme for 2018

We are delighted to launch our comprehensive new directory of courses for 2018.

As always, our programme includes brand new courses, perennial favourites, and exam training.

ISS Training Team expands across UK

Our training team has expanded, with Eileen Maclean joined by Alison Curry. Specialising in insolvency law and regulation in England & Wales, Alison will be leading our course offering for IPs south of the border.

Guest Speakers

We have invited several well-respected guest speakers from the worlds of tax, VAT and law to join us on some of our courses to provide complementary expertise and perspective. And we have again teamed up with experts in the fields of marketing and professional development to give you wider, relevant learning and development opportunities.

One Hour Series

These short online courses proved incredibly popular when we introduced them in 2017. Have a look at our full programme of webinars, presented in three series: Technical Shorts; Business Insolvency and Protecting Your Licence. There are 16 to choose from in total.

Locations

We train across the UK, with courses in Edinburgh, Glasgow, Manchester, Leeds and London.

Bespoke Training

We also offer bespoke in-house training, tailored to the specific requirements of your organisation. Clients find this especially valuable when they have a business need, require a confidential environment for training or have a team they wish to develop. All our open courses can be run as bespoke, or speak to us about designing a programme to match your needs.

 

To find out more, visit https://insolvencysupportservices.com/iss-training and to book places on any courses speak to Danielle Kelly on 0845 601 7570 or email courses@insolvencysupportservices.com

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: http://www.sweetandmaxwell.co.uk/Catalogue/ProductDetails.aspx?productid=715523&recordid=7095

Eileen Maclean invited to join TRI 250

Insolvency Support Services director Eileen Maclean has been announced as one of the members of leading trade journal Credit Strategy’s new TRI 250 group.

Launched at the prestigious UK TRI (Turnaround, Restructuring and Insolvency) Awards 2017 ceremony, held at the Hilton Park Lane Hotel, London, on 18 October, the TRI 250 is a new group of 250 prominent influencers, movers and shakers in the UK insolvency market.

The firm’s training arm, ISS Training, was also shortlisted in the Education/Training Provider of the Year category of the awards.

Eileen, a founding director of ISS and one of the UK’s foremost insolvency trainers and practitioners, commented: “We were delighted to have been shortlisted in these awards against such tough competition. It represents welcome recognition of the significant progress we have made in our training offering. Thanks very much to our amazing team for their hard work and commitment, and to our clients and delegates for their invaluable support and fantastic feedback.

I’m honoured to have been invited to become a member of The TRI 250, and look forward to contributing to its successful development.

In the last year we have greatly strengthened our training team with high calibre recruits, extended our programme to 120 open courses, including our new One Hour Series of webinars, welcomed hand-picked guest speakers to provide supplementary expertise, and added Leeds and London to our existing Edinburgh, Glasgow and Manchester locations.

Our 2018 training programme will be launched shortly.”

Insolvency Support Services up for training award

 

ISS Training has been short-listed in the Education/Training Provider of the Year category in the UK TRI (Turnaround, Restructuring and Insolvency) Awards 2017.

 

Eileen Maclean, a director of Insolvency Support Services and one of the UK’s foremost insolvency trainers and practitioners, commented: “This short-listing is very welcome recognition of the significant progress the firm has made in our training offering over the past twelve months. We are thrilled to have reached the final stages of these prestigious awards and would like to thank all our clients and delegates for their invaluable support and fantastic feedback.

 

It has been a momentous year for us. In addition to strengthening our team with high calibre recruits, we have extended our training programme to 120 open courses, including our new One Hour Series of webinars, welcomed hand-picked guest speakers to provide supplementary expertise, and added Leeds and London to our existing Edinburgh, Glasgow and Manchester locations.

 

We are now in the process of developing our 2018 programme of courses, which we look forward to launching during Autumn 2017.”

 

The TRI Awards Gala Dinner is being held on 18 October 2017 at the Hilton Park Lane Hotel, London.