The Insolvency (England and Wales) (No.2) (Amendment) Rules 2021 (‘Rules’) (Link)
Summary
From 1 October 2021 the Rules make extensive changes to the Insolvency (England and Wales) Rules 2016 (‘IR16’) to incorporate the Part A1 moratorium (in a new Part 1A of the IR16). The rest of the changes are consequential and other minor textual modifications to the remaining rules in the IR16 to include references to moratorium where necessary.
The Rules do not apply to any moratorium in force (or application for a moratorium made) before 1 October 2021.
Each corporate insolvency procedure is now helpfully contained in IR16 for reference. The instrument has also removed references to Schedule A1 moratorium process which was repealed by Corporate Insolvency and Governance Act 2020 (‘CIGA20’).
The explanatory memorandum accompanying the instrument makes clear that the policy of the permanent rules follows closely that of the temporary rules in Part 3 of Schedule 4 CIGA20. It cites the following examples where the operation of the moratorium has been improved:
1. Notice periods have changed to “business days” rather than “days” [in most places – you need to check]; and
2. To give the monitor more flexibility when assessing whether they ought to terminate the moratorium due to the company’s inability to pay its moratorium debts (or pre-moratorium debts not subject to a payment holiday) by allowing them to disregard debts they have reasonable grounds for thinking are likely within 5 days to be paid or compromised with the creditor’s agreement (Rule 1A.24).
In addition to the documents to be filed under section A6 of the Insolvency Act 1986 (including the monitor’s statement and consent to act), the directors will now need to file a “notice of filing”, which must contain the standard contents set out in Part 1 of IR16, when applying for the moratorium (Rule 1A.3). A similar requirement for a “notice of extension” is now included at Rule 1A.14 when applying for an extension to the moratorium, to accompany the documents required by section A10/A11 of the Insolvency Act 1986. The Rules also replace a number of statutory notifications to prescribed persons (e.g. creditors) with requirements to deliver to these parties a copy of the relevant notice filed at Companies House. The IR16’s methods of delivery now apply to moratorium notices, although creditors may not use the statutory opt out process.
Part 3 ‘Miscellaneous amendments of the Insolvency Rules’ of the Rules makes a number of consequential amendments, including –
- the notifications that must be given where a company enters another form of insolvency procedure during or after a moratorium;
- in subsequent insolvency procedures a Statement of Affairs must identify the debts owed by the company that were incurred during a moratorium (moratorium debts, and priority pre-moratorium debts);
- where a liquidator is required to seek the approval of certain creditors to litigation expenses under R6.45 or R7.113, those creditors may include those to whom a moratorium or priority pre-moratorium debt is owed;
- application of the provisions of Part 14 of IR16 where a dividend in respect of moratorium or priority pre-moratorium debts is contemplated; and
- changes to rules concerning court procedure and creditors’ decision-making which are intended to be of general application so as to ensure that they also cover moratoriums. For example, the time for creditors to request a physical meeting under Rule 15.6 of IR16 has been reduced to three (calendar) days for decision procedures convened for moratorium purposes.
It is also worth mentioning R1A.27 ‘Challenges to monitor remuneration in subsequent insolvency proceedings’. An administrator or liquidator may apply to the court on the grounds that remuneration charged by the monitor in relation to a prior moratorium was excessive within 2 years from the day after the day on which the moratorium ends. The court may order the monitor to repay some or all of the remuneration, and to pay interest on that sum at the rate of 8% for the period beginning with the date on which the remuneration was paid to the monitor and ending with the date of repayment.