22 Mar 2019

The new Insolvency Rules in Scotland – March 2019

The new Insolvency Rules in Scotland – March 2019

With upcoming changes to insolvency rules in Scotland, Trainee Solicitor in Dispute Resolution, Leona Duff gives us a rundown of what's different.

The highly anticipated Insolvency (Scotland) (Company Voluntary Arrangements and Administration) Rules 2018 (“CAR”) and Insolvency (Scotland) (Receivership and Winding Up) Rules 2018 (“the RWUR”) are due to come into force on 6 April 2019, these being the most significant change to insolvency working practices in Scotland in over 30 years.

Both sets of rules modernise and consolidate corporate insolvency rules in Scotland.

Key changes include modernisation of language, suspected improvements in creditor engagement, the removal of meetings as the default decision mechanism and the ability for creditors to opt-out of receiving correspondence, however some of the key changes which will affect daily working practice are outlined below.

Key changes

  • Removal of requirement for prescribed statutory forms – Chapters 5 – 8 of CAR and RWUR

  • Statutory forms and notices will be abolished and replaced with individual rules (“Standard Contents”) setting out the content requirements for forms, notices, documents and advertisements. This will require some adjustment and may result in short term delays. In addition, there is anticipated to be a new SIP 6, with the existing SIP 9 perhaps being amended. SIP 8, 10 and 12 have been withdrawn.

  • Remuneration – Chapter 3 RWUR

  • Where a legal account is agreed between the liquidator and provider of the legal services, they can be exempt from submission to the Auditor of Court for approval so long as the legal account has not been submitted by an associated party.

    Insofar as remuneration is concerned, there will now be more discretion in this area. In compulsory winding up and CVLs, there will no longer be a requirement for the liquidator to make a claim for remuneration every six months. As such, there will no longer be a requirement for the liquidator to apply to the Court for an extension. This will not remove the court process altogether, however will be useful in smaller cases where there is no expectation of a pay-out within the prescribed period. In such cases, the liquidator should instead notify creditors in a progress report of their intention not to claim remuneration at that time, under Rule 7.7 and 7.8.

  • Advertising – Rule 8.13 RWUR

  • Greater flexibility is given to the office-holder to advertise as they think appropriate in the circumstances. For example, under the above-noted rule, a company must advertise in the Gazette if a decision is being sought by a meeting as soon as reasonably practicable after notice is delivered to creditors, but any other advertising is to be carried out in such a manner as the convener thinks fit.

  • Small claims – Rule 3.118 CAR and Rule 7.34 RWUR

  • Office-holders can now rely on just the information contained in a company’s Statement of Affairs or company accounting records for small claims (those not exceeding £1,000), however this cannot be done if the creditor advises that the sum noted is incorrect or not owed. This will, in theory, reduce paperwork, with no Statement of Claim being required to be submitted (unless the creditor wishes to participate in a decision procedure).

It is not possible to cover all of the key changes within one article alone, however the following changes may also be of interest:

  • The ‘deemed consent’ procedure;
  • Enabling greater use of electronic communication;
  • Fixed term progress reporting;
  • Change of date for creditor claims purposes for winding up to the date company goes into liquidation; and
  • Increased privacy for private individuals who are creditors in insolvency proceedings.

With the Rules being reasonably voluminous, there is a great deal of information for both insolvency practitioners and solicitors to get to grips with before these come into force, and firms should start planning now for the changes.

If you would like further assistance regarding insolvency in Scotland, please click here to speak to our Dispute Resolution team: https://www.acandco.com/get-in-touch.

Disclaimer: Please note that the content of this article is for information purposes only. It is not intended to be construed as legal advice and should not be treated as such.

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