The New Insolvency Rules for Scotland Judith Howson – 13 March 2019 Restructuring & Debt Advisory Breakfast Briefing
1 This morning we will cover An introduction to the New Rules • Summary of the Key Changes introduced by The Insolvency • (Scotland) (Company Voluntary Arrangements and Administration) Rules 2018 (“CAR”) and The Insolvency (Scotland) (Receivership and Winding up) Rules 2018 (“RWUR”) General & concluding thoughts • Look at where and how the language has been modernised • Look at some of the new concepts • Derivation and Destination Tables • Transitional and Saving Provisions • Statement of Insolvency Practice • How to prepare • Questions & Appendices •
2 Introduction to the new rules Most significant change to insolvency working practices in Scotland • in over 30 years Commencement date is 6 April 2019 • Enacts provisions of Small Business Enterprise and Employment Act • 2015 and Deregulation Act 2015 Two sets of rules – Scotland has a partially devolved corporate • insolvency regime Over 300 pages across the two sets of rules • Attempts to bring Scotland’s corporate insolvency regime in line with • England and Wales Not long to get ready and a lot to learn •
3 Introduction to the new rules Modernisation of language / gender neutral / reduction of repetition • Consolidation • Improvements in creditor engagement • Reduce regulatory burden and costs on individual cases • Removal of requirement for prescribed statutory forms which • removes the requirement for amendments via statute in the future
4 Summary of key changes The removal of annual/creditors meetings • Remote attendance at meetings which are held • A move to decision making procedures • Electronic communication • Use of websites • Provisions as regards small claims of creditors • Opting out for creditors • Remuneration and Accounting periods • A move away from prescribed forms to standard content for gazette • notices and to the Registrar of Companies and the Accountant in Bankruptcy
5 Summary of key changes Advertising • Statement of Affairs • Statement of Concurrence • Verification by Affidavit • Closure • Interest •
6 The removal of annual/creditors meetings Annual meetings in winding up proceedings are now no longer • required Final meetings are abolished • The holding of meetings are no longer the default position, in order to • seek a decision from creditors, (however, members meetings remain) for example section 98 IA86 completely repealed Alternatively deemed consent or a qualifying decision-making • process for creditors
7 Remote attendance at meetings which are held A meeting summoned by an office-holder will require to • accommodate remote attendance so that those attending do not need to be in the same place Remote attendance will allow attendees their right to speak and • vote, even if not physically present, by the use of the appropriate technology e.g gotomeeting.com
8 A move to decision making procedures s246ZE IA86 Office holders can no longer hold physical creditors’ meetings in the • first instance, they must initially use: Deemed Consent • A Decision Procedure • Correspondence Electronic Voting Virtual Meeting Physical Meeting Any other decision making procedure which enables all creditors who are entitled to participate in the making of the decision to participate equally.
9 A move to decision making procedures Deemed Consent (s246ZF IA86 & R5.7 CAR & R8.7 RWUR) Allows office-holder to make a decision and advise creditors what this • decision is Deemed Consent process cannot be used for the approval of • remuneration or a Company Voluntary Arrangement or where Court rules Deemed Consent cannot be used again for same decision once • objected to Office-holder needs to send a notice to creditors that deemed • consent procedure will be used A decision via deemed consent is confirmed if no objections are • received
10 A move to decision making procedures Deemed Consent (R5.7 CAR & R8.7 RWUR) In order for a creditor to object they must: • Put the objection in writing • Complete a Statement of Claim form and supporting • documentary evidence Send these both in by the decision date • 10% in value of creditors is the appropriate number for the • objection threshold to be reached Convener will count up the total aggregated objections • If 10% threshold reached – must go to a decision procedure for • creditors and deemed consent procedure is terminated
11 A move to decision making procedures Deemed Consent (R5.7 CAR & R8.7 RWUR) What is the objection threshold? • 10% in value of creditors • If 10% or more in value of creditors object • – must use a decision procedure
12 A move to decision making procedures Correspondence (R5.3 (a) CAR & R8.3 (a) RWUR) This is a decision making procedure • No detailed provisions in CAR or RWUR •
13 A move to decision making procedures Electronic Voting (R5.2 to R5.4 CAR & R8.2 to R8.4 RWUR) Any electronic system which enables a person to vote without • the need to attend a particular location to do so Creditors need to be provided with information on how to access • the voting system, including any password required Voting should be open between notice being delivered and the • decision date During the period open for voting, the system should not reveal • any information to creditors regarding the vote cast by any other creditor
14 A move to decision making procedures Virtual Meeting (R5.2 to R5.5 CAR & R8.2 to Rule 8.5 RWUR) A meeting where persons who are not invited to be physically • present together may participate in the meeting including communicating directly with all the other participants in the meeting and voting (either directly or via a proxy-holder) Must provide information to creditors when providing notice of • decision procedure as to how to access the virtual meeting including any telephone number, access code or password required
15 A move to decision making procedures Physical Meeting (R5.2 to R5.6 CAR & R8.2 to Rule 8.6 RWUR) A meeting where the creditors are invited to be present together • at the same place (whether or not it is possible to attend the meeting without being present at that place) Request may be made before or after the notice of the decision • procedure or deemed consent procedure has been delivered, Must be made not later than five business days after the date on • which the convener delivered the notice of the decision procedure or deemed consent procedure (unless rules say otherwise)
16 A move to decision making procedures Physical Meeting (R5.2 to R5.6 CAR & R8.2 to Rule 8.6 RWUR) Onus on convener to check whether any requests for a physical • meeting have been submitted before the five business days deadline If requests are received the aggregate must meet or surpass one • of the following thresholds: 10% of creditors (any class) or contributories 10% of the total number of creditors (any class) or contributories 10 creditors (any class) or contributories THE 10/10/10 Rule
17 A move to decision making procedures Physical Meeting (R5.2 to R5.6 CAR & R8.2 to Rule 8.6 RWUR) If requests do reach one of the 10/10/10 rules, the decision • procedure is superseded and the physical meeting needs to be called – notice needs to be sent within 3 business days of threshold being breached Convener can allow a creditor to attend a physical meeting • remotely if a request is received prior to the meeting
18 How do we get to the decision date? R5.8 CAR & R8.8 RWUR Notice needs to be given to the creditors of the decision procedure • Rules lay down the content of the notice • Must be delivered to every creditor entitled to receive notice • Convener must authenticate and date the notice • Above is NOT required if Court rules that advertisement only is appropriate as its not cost effective to serve individual notices given the assets available and extent of creditors (R5.12 CAR & R8.12 RWUR)
19 How do we get to the decision date? Notice of Decision Procedures or Deemed Consent R5.11 CAR & R8.11 RWUR Administration – 14 days CVA - 7 days Receivership – 14 days CVL – 14 days, 7 days or 3 business days Compulsory winding up – 14 days Subject to the rules on postage (R1.38 CAR & R1.38 RWUR)
20 How do we get to the decision date? R5.2 CAR & R8.2 RWUR Decision is treated as made at 23.59 on the decision date • R5.9 CAR & R8.9 RWUR Votes must be received by the convener on or before decision date • (and time) Must be accompanied by statement of claim and documentary • evidence One valid vote required on or before decision date (and time) for • decision to be made
21 Excluded Creditors R5.33 to R5.35 CAR (virtual meetings or remote attendance of a physical) & R5.40 to R5.42 CAR (company meetings) R8.36 to R8.38 RWUR (virtual meetings or remote attendance of a physical) & R8.44 to 8.46 RWUR (company meetings) Rules the same • Excluded creditor – a person who has taken all steps necessary to • attend a virtual meeting or has been permitted by the convener to attend a physical meeting remotely and has not been able to attend the whole or part of the meeting
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