Insolvency technical update: March 2024
By Steven Wood, Practice Support Specialist (Insolvency)
1 April 2024
Read our latest insolvency technical update – your round-up of the recent developments in insolvency.
The Bankruptcy (Scotland) Amendment Regulations 2024
The above regulations have been laid and will come into force on 6 April 2024.
The regulations amend regulation 26 of the Bankruptcy (Scotland) Regulations 2016, which prescribes the rate of interest payable on creditors’ claims in sequestration (bankruptcy) under section 129(10)(a) of the Bankruptcy (Scotland) Act 2016 (‘the 2016 Act’), where there are sufficient funds to settle those claims in full. This interest is payable for the period from the date of sequestration until the creditors’ claims are paid.
Section 129(10) of the 2016 Act currently specifies that the rate of interest payable is the greater of:
a) The prescribed rate at the date of sequestration.
b) The rate applicable to that debt apart from the sequestration.
Currently, the prescribed rate of interest is a fixed percentage of 8% per annum. The regulations will amend the mechanism for calculation of the prescribed rate of interest from a fixed percentage to a rate more closely aligned to the prevailing rate of interest at the date of sequestration.
It will be based on the Bank of England base rate at the date of sequestration, plus 2% to compensate creditors for delays in recovering sums due to them. However, creditors will continue to be entitled to interest at their contractual rate if this is greater than the prescribed rate.
The amended prescribed rate will only be applicable in cases where the date of sequestration falls on or after the date the regulations come into force (6 April 2024).
Bankruptcy and Diligence (Scotland) Bill (‘the Bill’) – Stage 2
Stage 2 of the Bill was completed on 20 March 2024. Amendments agreed include:
- The removal of the upper limit on the window for citation of a debtor to appear at a sequestration hearing. This is currently 14 days, as specified in section 22(4) of the Bankruptcy (Scotland) Act 2016.
- An amendment to provide certainty around the payment of interest where sequestration is recalled. This will mean that, within the first six months of a sequestration, recall may be awarded on the basis of full repayment of debts without interest being charged. However, where debts are repaid more than six months after the sequestration begins, interest would have to be paid for a petition or application for recall to be successful.
- A technical fix to ensure commissioners can’t be appointed or continue to act in cases where the Accountant in Bankruptcy is trustee.
The Economic Crime and Corporate Transparency Act 2023: Companies House changes
The first measures under the Economic Crime and Corporate Transparency Act 2023 came into force on 4 March 2024. Changes introduced include:
- Greater powers to query information and request supporting evidence.
- Stronger checks on company names.
- New rules for registered office addresses (all companies must have an appropriate address at all times - they will not be able to use a PO Box as their registered office address).
- A requirement for all companies to supply a registered email address.
- A requirement for subscribers to confirm they are forming a company for a lawful purpose when they incorporate, and for a company to confirm its intended future activities will be lawful on its confirmation statement.
- Greater powers to tackle and remove factually inaccurate information.
- The ability to share data with other government departments and law enforcement agencies.
Debt relief order (DRO) changes
As part of the spring Budget, the government announced the removal of the £90 administration fee for DROs, effective from 6 April 2024.
From 28 June 2024, the maximum debt value threshold is to be raised from £30,000 to £50,000 and the maximum value of motor vehicle that an individual can retain will increase from £2,000 to £4,000.
Giving notice of statutory declaration of solvency
A new version of form LIQ01, used to notify Companies House of a statutory declaration of solvency, has been published.
The form was updated following the Economic Crime and Corporate Transparency Act 2023 (Commencement No. 2 and Transitional Provision) Regulations 2024 bringing into force section 77 of the Economic Crime and Corporate Transparency Act 2023 on 4 March 2024.
That section amends section 89 of the Insolvency Act 1986 and Article 75 of the Insolvency (Northern Ireland) Order 1989, so that office holders are now required to provide Companies House with a copy of the declaration of solvency rather than the original declaration in a members voluntary liquidation.
Changing the registered office of a company in liquidation
Companies House has published a new form AD01 to change the registered office address of a company in liquidation. This also applies if you're restoring a company or if it has a default address.
The publication of the new form also follows changes brought about by the Economic Crime and Corporate Transparency Act 2023 that came into force on 4 March 2024. Specifically, the provisions requiring the company to ensure that its registered office is at all times at an ‘appropriate address’ as defined in the updated section 86 of the Companies Act 2006.
Changes to Companies House fees
Companies House fees are increasing from 1 May 2024. A table setting out the new fees has been published.
VAT Notice 700/56
Section 7.9 of VAT Notice 700/56 has been updated to clarify that form VAT833 may still be completed for use in the management of property by Law of Property Act (LPA) receivers.
Dear IP
Dear IP 163 has been issued by the Insolvency Service. The issue contains details of Companies House’s enhanced powers, the DRO changes announced as part of the spring Budget and details of the FCA guidance consultation referred to later in this update.
Temporary RPS policy for processing the claims of irregular hours and part-year workers
The Insolvency Service has issued an update for insolvency practitioners on a temporary RPS policy for processing the claims of irregular hours and part-year workers.
Standard Financial Statement (SFS)
The SFS guidance has been updated with two amendments designed to provide further clarity when using the SFS. The new guidance came into effect on 1 April.
New spending guidelines also came into effect on the same date.
The Employment Rights (Increase of Limits) Order 2024
The above Order will come into force on 6 April 2024.
The Order increases the limits (maximum or minimum) applying to certain awards of employment tribunals and other amounts payable under employment legislation, as specified in the schedule to the Order.
For individuals made redundant on or after 6 April 2024, their weekly pay will be capped at £700 (up from £643).
FCA Guidance Consultation - Proposed amendments to FG21/4: Guidance for insolvency practitioners on how to approach regulated firms
The FCA is consulting on proposed guidance aimed at insolvency practitioners appointed over firms solely authorised or registered by the FCA.
In 2021, the FCA published FG21/4: Guidance for insolvency practitioners on how to approach regulated firms. Since then, there have been changes in the legal framework affecting firm failure, in the regulatory framework and in the UK economic climate. The guidance may consequently benefit from an update.
Responses to the consultation are invited by 30 April 2024.
Accountant in Bankruptcy (AiB) Dear Trustee letters
Following the launch of the AiB’s new website, ‘Dear Trustee’ letters will no longer be issued to anyone who hasn't subscribed via the new website to the relevant mailing list.
Legal update
Christopher Turnbull for relief under section 122 of the Insolvency Act 1986 against the directors of Against The Head Limited: A Court of Session opinion considering the petition of a minority shareholder (and former employee and director) of the company, which sought a winding up order under section 122(1)(g) of the Insolvency Act 1986, which provides that a company may be wound up if the court is of the opinion that it is just and equitable. The petition was successfully opposed by the company and its directors.
