Dispute Resolution

On 6 April 2019 the Insolvency (Scotland) (Receivership and Winding up) Rules 2018 (“RUWR”) and the Insolvency (Scotland) (Company Voluntary Arrangements and Administration) Rules 2018 (“CAR”) will come into force (together “the New Rules”). The New Rules implement the most significant changes in corporate insolvency law in Scotland in over 30 years. There are two sets of rules, one for liquidations and receiverships and the other for administrations and company voluntary arrangements.

The New Rules have been drafted to, so far as possible, replicate the insolvency rules for England and Wales but there are still differences north and south of the border such as the rules relating to office holders’ remuneration. The language has been modernised by using gender neutral language, simple terms rather than overly legal language and reducing duplication. It is anticipated that the introduction of the New Rules will result in the cost savings and greater efficiency in corporate insolvency procedures in Scotland.

The New Rules do not change the substantive law but will change the procedure for the conduct of  corporate insolvencies in Scotland. The key changes include:

  1. Removal of the automatic requirement to hold a physical meeting. Creditors will be able to request a physical meeting if the 10:10:10 rules is triggered (either 10% in value of creditors or 10% in number of creditors or 10 creditors in number request a physical meeting).
  2. New decision making procedures: deemed consent and qualifying decision procedure.
  3. Creditors can opt out of receiving certain correspondence from the IP, although they can opt back in at any time. Creditors cannot however opt out of receiving notice of payment of a dividend. It is hoped this change will save costs.
  4. The use of electronic communication with creditors and dedicated websites. This is a welcome change from the old Rules, where consent was required regardless of the mode of communication used pre-insolvency. Again this will save cost.
  5. Small dividend payments can be made where the debt does not exceed £1,000 without requiring a formal claim from creditors.
  6. More flexibility in relation to accounting periods, the timing for fixing liquidator’s remuneration and payment of dividends.
  7. IPs now have discretion in relation to advertising in the Gazette or a newspaper and will only place adverts where they consider it appropriate.
  8. Personal information is more stringently protected under the New Rules.

As of the 6 April 2019 the New Rules will be in force and will apply not just to insolvencies that commence after that date but  to all existing insolvencies in Scotland subject to some transitional provisions. Only time will tell whether the changes do reduce costs and improve the efficiency of corporate insolvency procedures in Scotland.