14 May 2020

Second Cornivirus Bill to bring more legal changes

Second Cornivirus Bill to bring more legal changes

Lockdown as we know it in Scotland is set to continue for at least a further 3 weeks. However, it continues to evolve.

Coupled with Government updates announced over the last few days, further emergency measures have been introduced to Parliament in response to the COVID-19 pandemic through the Coronavirus (Scotland) (No.2) Bill - the “Second Bill”. The Second Bill was introduced in the Scottish Parliament on 11th May 2020 and adds to the legislative changes already made by the Coronavirus (Scotland) Act 2020.

The Scottish Government’s Policy Memorandum published in relation to the Second Bill states that it contains measures to:

  • Make bankruptcy easier to access for those who need it;
  • Make it harder for creditors to make individuals (and sole traders) bankrupt; and
  • Make bankruptcy processes easier to administer.

If passed, the Second Bill will raise the minimum debt level that an individual must owe before a creditor can petition for their bankruptcy to £10,000, which is a significant increase on the previous threshold of £3,000.

Taken together with the Statutory Moratorium extension (of 6 weeks to 6 months) included in the 2020 Act, the Scottish Government states that the principal purpose of these measures is to ensure adequate time for those who will be able to repay their debts in time, once they have recovered from the immediate financial shock caused by the economic impacts of the coronavirus outbreak.

This proposed measure would be a positive for those who are experiencing financial hardship due to, for example, having been furloughed or made redundant due to the ongoing effects of Covid-19.

On the other hand, it will push the pendulum further in favour of debtors in this jurisdiction; and limit diligence options available to creditors.

The Second Bill contains the following safeguards:

  • Most of the measures in the Second Bill will expire at the end of September 2020. (They could be extended up to a maximum duration of a further year, if the Parliament approves this);
  • Where a measure is no longer needed, Scottish Ministers can bring it to an end earlier; and
  • Scottish Ministers must review and report on the measures every 2 months.

In terms of other proposed legislative changes introduced by the Second Bill, there is also a proposal to remove bankruptcy application fees from for those whose sole income comes from certain benefits, and reduce them from £90 to £50 for others.

The application fee for full administration bankruptcies is also reduced from £200 to £150 to make bankruptcy easier to access for those who do not qualify for the Minimal Asset Process.

The final set of changes in relation to bankruptcy within the Second Bill is intended to deal with the impact of physical distancing, particularly to facilitate the use of electronic communication and to permit virtual meetings of creditors.

Further key elements of the Coronavirus (Scotland) (No.2) Bill include the introduction of notice to leave periods for students in purpose-built student accommodation and halls of residence.

Further updates in relation to the Second Bill will be published in due course. If you require advice in relation to the implications any changes may have on you or your business, our Dispute Resolution team would be delighted to assist.

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