The 6th April this year is not only the beginning of a new tax year, but the day the new insolvency rules are introduced. Probably the largest wholesale revision of the insolvency legislation since 1986 and a day some IPs will look forward to and others with trepidation of having to learn a new way of working.
Many things have changed, and many things appear to have stayed the same but the layout of the rules is completely different to those previously introduced and it will take time for IPs to familiarise themselves with the new content and format. There will be plenty of opportunity for innovation, development and mistakes. Personally I hope the RPBs will give the IPs time to get to grips with the rules.
It is sadly time to say goodbye to physical creditors meetings unless requested by 10% in value, number or 10 actual creditors (simply remember 10!). Say hello to deemed consent and virtual meetings approving the IPs activities. It will be for the creditors to be actively engaged in the insolvency process or decisions will be made with which they don’t necessarily agree. Creditor apathy could allow the IP to avoid scrutiny of their actions, processes and above all else their fees.
It is not only time to say goodbye to meetings at the beginning of an appointment but also at the end, however IPs will still need to send out final reports for the creditors to consider.
The new rules will allow for electronic communications, and it is expected that many IPs will set up dedicated websites for each assignment through which they can communicate with creditors. It will be for the creditors to be alert for notices, reports and other documents being sent out which require their consideration.
The idea behind the new rules was not only to modernise communication channels with creditors, but also get greater creditor engagement in the insolvency process.
However it is likely that the new rules will allow for the commoditisation of the liquidation process, creating liquidation bulk providers, just like in the IVA market. This could lead to the hollowing out of the profession, the middle ground being replaced by technology.
However it is not all doom and gloom for the IP, their skills will be needed in the initial advice, the strategy, and any turnaround and reconstruction work, not to mention investigation if there is an insolvency. The Administration process used for rescuing business is likely to provide a home for the IPs skills.
At present the legislation requires any insolvency appointment to be a personal one, and like in the world of the IVA bulk provider, the corporate IP will not be the owner of the firm, and will be just plugged in to make the machine work.
It is time for a change of emphasis and for IP regulation to extend from the individual to the firm in which they work, without it the IP is left vulnerable to the activities of the firms’ owners.