The government has announced measures which it says will help cut the cost of insolvency procedures and benefit creditors by £30 million a year.
The measures, which follow a consultation exercise last year, will remove the requirement for insolvency practitioners (IPs) to obtain the court orders necessary to carry out even basic insolvency procedures and extend the use of digital communication with creditors.
Announcing the changes on 23 January, Business Minister Jenny Willott said: “When businesses do enter the stage of insolvency we need to make sure that the process is as smooth and straightforward as possible.
“One way of doing this is cutting burdensome red tape which makes insolvency proceedings less complicated and troublesome. At the same time, when companies do fail, we need to make sure creditors get a fairer deal.”
The measures include:
- allowing IPs to communicate with creditors electronically, instead of by letters
- removing the requirements for IPs to obtain court orders for certain actions, including extending administrations and posting information on websites
- reducing record keeping requirements for IPs when the records are only used for internal purposes
- simplifying and speeding up the process of reporting director misconduct by introducing electronic forms
- allowing IPs to rely on the insolvent’s records when paying small claims, reducing the need for creditors to complete claim forms.
Some of the measures will require legislative changes that will be taken forward when Parliamentary time permits. Others will be changed through secondary legislation as part of the rewrite of Insolvency Rules, due for completion in 2015-16.
As the new regulatory framework evolves, Palmers can provide expert advice to assist insolvency professionals as they support clients to achieve the best possible outcomes. For more information, please visit our website or contact Andrew Skinner.