New insolvency rules in force today
New insolvency rules in force today
I make no apology for including yet more football and music themed analogies in an insolvency themed blog. Those who have suffered my blogs over the years will be well used to it. The title came to me as I was kicking my heels to keep my feet warm at Villa Park in my old home town on Tuesday night. I was eager with anticipation for what turned out to be a welcome, if very hard fought victory for the home team I have supported since 1981, when I was but a little lad of 7 years old. I was with another Villa fan at the match – an insolvency practitioner whose staff had just completed the latest round of their training on the Insolvency Rules 2016, which have finally come into force in England & Wales today, 6 April 2017. For whatever reason, the situation put me in mind of Euro ’96, and the lyrics to the Lightning Seeds / Skinner and Baddiel’s “3 Lions” (bear with me!).
Whilst I confess to a certain level of nostalgia about the Insolvency Rules 1986 (possibly because after almost 20 years of applying them in person I had a fairly encylopedic knowledge of them – handy because they will still apply for many purposes), I cannot deny that they were long overdue for an overhaul. As they had evolved over such a long period of time, reflecting multiple changes in government administrations and policy, they were perhaps inevitably in something of a state. Most (insolvency) commentators now agree that the new rules (particularly compared to the early drafts issued some years ago) are at least much more logically laid out, and in clearer English, even if they do run to some 444 pages, 22 parts, 140 chapters, 11 schedules and one note!
“Everyone seems to know the score…”
I will not of course attempt to summarise the new rules here, or even to pull out their key features because – frankly – that has been done to death by all and sundry over the past couple of months and in truth none of us have all the answers anyway, even the drafters. Moreover, we have pretty much all now been on training sessions (some of us have even given these), watched the webinars, the DVDs and generally bought the t-shirt (even if we’re not sure it’ll fit). The truth is, though, that whatever anyone says about how the new rules largely just restate the old in clearer language, we haven’t “seen it all before”. This is the single biggest change in insolvency law in over 30 years and it will take time to adjust our thinking, attitudes and practice.
“So many jokes, so many sneers…”
The criticism I hear most often about the new rules is that the new Part 15, entitled ‘Decision Making’ is impractical. I hear IPs asking, amongst other things:
“surely creditors are not going to engage with virtual meetings, are they?”;
“the IT won’t be up to it”;
“can I just use the old forms and block out the form numbers?”;
“is there any point in the deemed consent procedure when ultimately they might just delay matters if someone objects and I can’t get remuneration approved that way anyway?”;
“am I really going to get more creditor committees (which might actually be helpful) just because I have to write chapter and verse about it every five minutes?”
Some of the criticism derides the rules in their entirety before they have even had a chance to get going, and some of the jokes are possibly just masking the fact that we haven’t properly got to grips with them yet and are nervous about their operation.
“But all those oh so near’s…”
There is a risk here that if we do not engage with the new rules in a positive spirit, and believe that they can be made to work, they will herald a false dawn (a bit like Euro ’96).
There is no doubt that aspects of the new rules and their introduction have been disappointing, not least the fact that they have in recent days and weeks been subject to multiple amendments, with no doubt many more to come after today. The fact that the Insolvency Service had to give up on answering practitioners’ questions about the interpretation of the drafting in January, following repeated references to their own legal advice, did not fill everyone with confidence. Even now, there is a strong sense that the drafters did not adequately think through the decision making procedures to make them fully workable; after all how can something be future proof if it is not even fit for the present? By the same token, with the disappearance for most purposes of the prescribed forms, there is a sense that insufficient activity has taken place to ensure that industry approved precedents were ready for today, whether published by the Insolvency Service, Companies House, or other approved / free of charge providers, with the consequence that paid third party providers (who to be fair have no doubt invested thousands of hours in the process, so why should they not charge well) have had to step into the breach. Is this likely to create differing practices and uncertainty going forward? Certainly!
That said, however, there is much to be applauded here in the efforts being made, and the noises coming out from the regulators and others to the extent that there will for a time be a certain amount of flexibility and forgiveness as we all adjust to the new way. I for one have small doubt that the wrinkles will be ironed out, and that by the time we are discussing the rules at the R3 Southern Area Conference in Bournemouth on 21 / 22 September 2017 (please note your diaries if you haven’t already), we will have very few questions remaining and hopefully lots of answers.
“It’s coming home…”
The theme of this blog is, therefore, one of quiet optimism and a call for a great deal of patience over the coming months as IPs and stakeholders get to grips with the new regime in practice. The IPs and the lawyers they work closely with should in principle be leading the charge over the coming months, and it will presumably take creditors and their representatives a little longer to adjust, and work out how they should be engaging with the new rules and procedures. Creditors in particular, therefore, need to try to be patient with the IPs who are finding their way as well, and with the processes which will undoubtedly require them to adopt a more proactive stance if they want to get the best out of the insolvent situation.
Before long, I have every confidence that we shall feel as ‘at home’ with the new rules as we were with the old, if not more so. Like Aston Villa supporters on Tuesday night, we have had the long build up and a bit of a poke around the stadium, taken our seats and cheered the early goal; we now have to squirm on the edge of our seats and ride out the frustration for the rest of the match until we can finally claim the victory!
If you have any questions about the Insolvency Rules 2016 (or Aston Villa FC) which I can help with in my capacity as solicitor or as Southern Region Chairman for R3, please do not hesitate to contact me.