The Coronavirus (Scotland) (No.2) Bill (the "Bill") has been introduced by the Scottish Parliament today, 11 May 2020. The aim of the Bill is to respond to the financial impact the COVID-19 pandemic is having on individuals and small businesses (by that Scottish Ministers mean sole traders, not companies incorporated under the Companies Act 2006).
The Bill complements the Coronavirus Act 2020 and the Coronavirus (Scotland) Act 2020 (the "Scottish Act"). The Bill is being progressed on an expedited basis in order to deliver additional support when it is required. The intention is that the measures, included in the Bill, will expire in September 2020, but there a mechanism which could allow Parliament to extend in line with the sunset clause until September 2021, if required. Assuming the Bill is passed, Scottish Ministers must review and report on the measures every two months, providing another mechanism of review. If they are not required, they could be brought to an end.
The measures
The Bill includes a variety of amendments to the personal insolvency regime in Scotland and will amend the Bankruptcy (Scotland) Act 2016. The measures are designed with the specific purpose of addressing the economic hardships that many individuals and small businesses are currently facing. The proposed changes are:
- To increase the minimum threshold for a creditor petitioning for sequestration from a debt of £3,000 to a minimum of £10,000;
- To increase the level of debt in Minimal Asset Process ("MAP") bankruptcies from £17,000 to £25,000 (this figure excludes student loan calculations);
- To reduce the fee for MAP applications (for those on certain benefits from £90 to £50); and
- To reduce the full administration bankruptcy fee from £200 to £150, to make the process more accessible to those who do not qualify for MAP.
These measures are designed to give breathing space, and compliment the measures already introduced, e.g. the extension of the personal moratorium to six months, which was included in the Scottish Act.
The most radical measure is the proposal to raise the petitioning creditor level from £3,000 to £10,000, which will make it harder for creditors to obtain the ultimate diligence and recover monies they are owed.
The Bill also allows an inhibition to be renewed or registered electronically in the Register of Insolvencies. This practical measure to allow electronic registration brings the Register of Inhibitions into line with others kept by the Registers of Scotland and will be welcomed by practitioners.
We will be keeping you apprised of the passage of the Bill and any significant amendments that are tabled in relation to personal insolvency. Given the limited opportunity for debate, we expect the Bill will pass without much amendment. No doubt stakeholders would be pleased to see features such as the electronic registration of inhibitions to remain after the pandemic, but we expect there would significant opposition is there was any move to make the £10,000 petitioning creditor level a permanent feature of Scottish insolvency law.
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