A number of key notable changes impact the insolvency market from 6 April, namely:
- The insolvency estate (whether corporate or personal) will neither be able to recover any success fee following entry into a conditional fee agreement nor the premium on any ATE insurance, for example in pursuing claims against rogue directors. As a result, office-holders may now struggle to fund such litigation where funds in the estate are limited. Perversely, one consequence may be that directors who act improperly and strip out and leave the company without any (cash) funds may now be less likely to be pursued! The impact on creditors as a whole is anticipated to be substantial: R3 (The Association of Business Recovery Professionals) estimates that £480m is recovered for creditors each year by office-holders acting on a conditional fee basis.
- A debtor who wishes to make him- or herself bankrupt will now have to make an online application rather than issue a petition for their own bankruptcy. The good news, if there is any when contemplating such a step, is that the overall fee (including official receiver’s deposit) has been reduced by 7% to £655 and can now be paid in instalments; this change will be welcome by impoverished debtors who didn’t have the funds to pay the fee in one lump sum. The online bankruptcy application is accessed through the Insolvency Service website and an individual will enter bankruptcy only once the full fee has been paid, following a review by an appointed adjudicator (i.e. the application is no longer processed by the court at this initial stage).
- Finally, further aspects of the Small Business, Enterprise and Employment Act 2015 have now come into effect. Insolvency practitioners are now required to submit a conduct report within three months of commencement of any insolvency process in relation to every person who was a director of the insolvent company in the previous three years. Previously, office-holders had a period of six months within which to submit any report and it was confined to unfit directors only. It is hoped that this change may bring any misconduct to the attention of the Secretary of State and lead to action being taken against rogue directors sooner, although the new requirement will undoubtedly be more onerous for the insolvency practitioner with the reduction in timescale and widened scope of the report.
For more information on any of the issues raised, please contact Tim Carter, firstname.lastname@example.org, or any other member of the Insolvency team at Stevens & Bolton.