Celebrating International Women’s Day 2019

Insolvency Support Services is proud to be celebrating International Women’s Day (8 March 2019).

Today – and every other day of the year – we recognise the vast and vital contribution that our many talented female colleagues and clients make not just to our own business, but also to the insolvency industry throughout the UK.

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.

Take the hassle out of ensuring your checklists and document packs are new-Rules-compliant

Have you updated your checklists and document packs in time for the introduction of the new Scottish Insolvency Rules on 6 April 2019?

Our new-Rules-compliant standard documents are available to order now, for delivery early/mid March, ready for the new legislation commencement date.

As we have been highlighting on our New Rules courses, there are process changes to Court Liquidation (SWUC) Creditors and Members Voluntary Liquidation (SCVL and SMVL) and Administration (SADM).

Some of the changes to SCVL and SMVL will ensure that the process in Scotland now mirrors the England & Wales Rules, but crucially, the remuneration approval process in Scotland for insolvency liquidations, and to an extent SADM, is not changing in structure, although there are amendments to how it will apply. There are myriad other changes that will need to be incorporated into your checklists and document packs.

We can supply checklist and document packs to support the revised Scottish statutory processes.

We have revised the structure of our document packs to reflect that the liquidation post appointment process will be broadly identical.  Prices are as follows:

Procedure Checklist Document Pack Combined
SWUC 750 750 1,500
SCVL 750 750 1,500
SMVL 750 750 1,500
Liquidation Generic 750 750
SADM 750 1,500 2,250

If you want to purchase just one liquidation pack, say SCVL, you would purchase the checklist, the specific document pack and the generic Liquidation pack, at a total of £2,250. If you were intending to purchase SCVL and SWUC, then you purchase the two specific checklists and packs, and the generic liquidation pack to support both procedures, at a combined cost of £3,750.

Purchase of three or more packs attracts a discount.

If you or your colleagues attended or wish to purchase our New Rules webinar, the cost of that attendance to a maximum of 5 participants and £250 (net) is redeemable against the purchase of any of the above checklists or document packs.

Contact us at enquiries@insolvencysupportservices.com or on 0845 6017570.

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.

 

New Scottish Insolvency Rules 2018

Thanks to everyone who attended the first of our New Rules training courses in Glasgow on 16 January. Great to see so many of you, and thanks for such positive feedback on the course. Out of an overall score of 5, this course scored 4.69!

Testimonies include: “ very informative training session / well presented” and “the content is brilliant”.

We have also taken on board your feedback about the amount of content – for which thanks – and will adjust that for courses going forward.

There is still an opportunity to book for the Edinburgh course on 22 January, and booking is open for Aberdeen, Manchester and London. Alternatively we still have half days slots available for in-house team training.

Contact courses@insolvencysupportservices or for more details click here

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.

ICAS Insolvency and Restructuring Conference 2018

Insolvency Support Services director Eileen Maclean is delighted to have been invited to join a superb line-up of speakers at the ICAS Insolvency and Restructuring Conference 2018 at Gleneagles on 13 and14 November. The theme of this year’s conference is A Profession in the Spotlight, which ICAS has chosen to reflect the increasing levels of scrutiny faced by our profession.

For more info and to book: https://www.icas.com/events/the-icas-insolvency-and-restructuring-conference-2018

If you’re going too, Eileen hopes to catch up with you there.

Guest lecturing on insolvency

Insolvency Support Services director Eileen Maclean presented to a different audience from our usual earlier this month when she was back at The University of Glasgow Adam Smith Business School to guest lecture again on corporate insolvency with course leader Yvonne Joyce.

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: https://www.scottishparliament.tv/meeting/economy-energy-and-fair-work-committee-part-i-october-30-2018