Liquidation Procedures: New administrative rules being phased in.
With the new tax year already upon us, clients could be forgiven for thinking that all they need concern themselves with are the plethora of new fiscal rules about to impact on their businesses. However, further perhaps overlooked changes are about to be made to insolvency law with effect from 6th April, 2017.
The Insolvency Rules 2016 aim to consolidate over 20 pieces of amending legislation, the main aspects of which are:-
- Creditors meetings are to disappear unless at least 10 creditors or 10% of the total request one (by number or value). A similar percentage applies to objections to an insolvency office-holder’s proposals.
- Creditors can opt-out of receiving paper correspondence in favour of electronic communication (which includes voting).
- Small claims below £1000 can be made without a formal submission provided these are verifiable from accounting records.
Further changes are envisaged in relation to a proposed “out-of-court moratorium”, freeing companies from legal action by creditors for 3 months, coupled with a new FRP (Flexible Restructuring Plan) giving priority to the provision of fast turnaround finance.
The overall aim is to cut costs and hence raise dividend distributions to creditors, and also to improve the chances of business recovery.
Blog entry by: Chris Morton