Insolvency technical update – July 2022
By Steven Wood, Practice Support Specialist (Insolvency)
3 August 2022
Insolvency technical update – your round-up of recent developments in insolvency
Advertising rules for IVAs and PTDs
As reported in last month’s technical bulletin, the UK Committee of Advertising Practice (CAP) has launched a market-wide enforcement project about advertisements placed by lead generation companies and licensed insolvency practitioners, which ultimately advertise services for individual voluntary arrangements (IVAs) or protected trust deeds (PTDs).
Monitoring and enforcement in line with the published Enforcement Notice (‘the Notice’) commenced on 25 July 2022.
An article looking at the Notice is available on the ICAS website.
The Russia (Sanctions) (EU Exit) (Amendment) (No. 14) Regulations 2022
The above regulations came into force on 21 July 2022.
The regulations provide for a number of trade restrictions, including the provision of accounting, business and management consulting, and public relations services to persons connected to Russia.
An article looking at the scope of the regulations is available on the ICAS website.
Register of Overseas Entities
The new Register of Overseas Entities, created by the Economic Crime (Transparency and Enforcement) Act 2022, is operational from 1 August 2022.
The new register is held by Companies House and forms part of the government’s strategy to combat economic crime. It will require anonymous foreign owners of UK property to reveal their real identities to ensure criminals cannot hide behind secretive chains of shell companies.
Call for evidence: Review of the personal insolvency framework
The Government has issued a call for evidence to aid its review of the personal insolvency framework in England and Wales.
The call for evidence seeks views on:
- The purpose of the framework, what should be the objectives for a modern insolvency framework and where should the balance fall in providing debtors with a fresh start or ensuring returns to creditors.
- Fees and funding. How should insolvency solutions be paid for, what are the wider consequential costs of insolvency. Is the current burden of costs apportioned fairly?
- The current procedures within the personal insolvency framework (bankruptcy, Individual Voluntary Arrangements, Debt Relief Orders) and how they are working. It asks whether there are underlying areas of concern about the framework, what motivates debtors to seek one insolvency solution over another, are there barriers to entry to certain insolvency solutions? Is the framework sufficiently flexible and does it provide the right sort of insolvency solutions for the modern day.
The call for evidence is open until 24 October 2022. The Government is interested to hear views from individuals who have considered or been subject to a personal insolvency procedure, creditors and their representatives, debt advisers and charities, insolvency office holders, insolvency regulators, academics and any other interested parties.
ICAS will be responding to the call for evidence and welcomes views and comments to feed into that response, which should be emailed to swood@icas.com in the first instance.
Dear IP
Dear IP 148 has been issued by the Insolvency Service. The issue provides details of HMRC’s update on voting on voluntary on voluntary arrangements and Dropbox as well as the FCA’s guidance on its approach to compromises for regulated firms.
HMRC Guidance
HMRC has issued an Insolvency Guidance note providing an update on:
- Voting on voluntary arrangements
- Using their Dropbox facility
- MVL clearances
Cost of living payment in debt solutions
As a response to the UK Government’s cost of living support package, the AiB has drafted additional guidance (as Appendix B to the Common Financial Tool notes for guidance) to set out how the AiB expects Trustees/Money Advisers to treat cost of living support payments and, in particular, how the payments should be recorded on an individual’s income and expenditure.
Redundancy payment forms: amending claims
Word .docx versions of the various forms used to amend a mistake or add information to an online claim for redundancy have been added.
Financial Conduct Authority (FCA) approach to compromises for regulated firms
The FCA has issued finalised guidance on its general approach to firms it regulates who require to compromise debt as part of restructuring.
The finalised guidance includes a summary of feedback received to the FCA’s earlier consultation to which ICAS responded.
Consultation on the implementation of two UNCITRAL Model Laws on Insolvency
A consultation has opened proposing the implementation into UK law of two “model laws” adopted by the United Nations Commission on International Trade Law (“UNCITRAL), further developing the international framework for the management of cross-border insolvencies.
The consultation closes on 29 September 2022.
The Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022
The above regulations were made on 21 July 2022.
The regulations make some time-sensitive updates to The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (‘MLRs’). The changes are being made to ensure that the UK continues to meet international standards on anti-money laundering (‘AML’) and counter-terrorist financing, whilst also strengthening and clarifying how the UK’s AML regime operates, following feedback from industry and supervisors.
The Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) (No. 2) Regulations 2022
The above regulations came into force on 12 July 2022.
The regulations amend the list of High Risk Third Countries defined under the MLRs. Malta is no longer classed as a high-risk country for the purposes of enhanced customer due diligence requirements, with Gibraltar added to the list of countries where enhanced due diligence is required.
The Payment and Electronic Money Institution Insolvency (England and Wales) (Amendment) Rules 2022
The above Rules come into force on 10 August 2022.
The instrument corrects drafting errors in the rules for the special administration procedure established in The Payment and Electronic Money Institution Insolvency (England and Wales) Rules 2021.
Client Due Diligence Case Studies
The CCAB has published four case studies to assist the accountancy profession in keeping its knowledge of client due diligence up to date.
Insolvency Service Summer newsletter
The latest edition of the Insolvency Service newsletter has been published.
It includes articles on Insolvency Live, new policy developments and bounce back loan enforcement successes.
Legal update
Appeal by Samantha Warburton against the Accountancy In Bankruptcy: A Sheriff Appeal Court judgment refusing the Appeal of the trustee against the decision of the Sheriff at Edinburgh that a charge incurred by the trustee in a Protected Trust Deed (‘PTD’) for “secure data and call recording storage” should be treated as a cost of the business and not as an outlay charged to the estate of the debtor.
However, it is important to note that the appeal was refused essentially on a technical basis. The judgment states that while the Sheriff was entitled to make the decision he did, it is not agreed that he approached it correctly and the Court “would have found the sheriff to have erred in that regard”. This leaves a very interesting position that while the outlay has been disallowed in the PTD case in question, given the Appeal Court’s findings, it would appear that the same outlay should be allowed in other PTDs subject to the storage services contract at the centre of this decision.
A previous ICAS article considered the original decision.
E Realisations 2020 Ltd, Re [2022] EWHC 1575 (Ch): An English High Court concerning the validity of the creditors’ consent obtained by the administrator for the extension of the administration (via Brodies LLP).
