Decision procedures and deemed consent in insolvency proceedings (from 6 April 2017): toolkit

A toolkit for Practical Law Restructuring and Insolvency's materials on decision procedures and deemed consent from 6 April 2017, including links to our standard forms and notes to assist in completion of those forms.

Practical Law Restructuring and Insolvency

Scope of this toolkit

This toolkit provides a guide to Practical Law Restructuring and Insolvency's materials relating to the decision procedures ( www.practicallaw.com/w-005-1130) and deemed consent ( www.practicallaw.com/w-005-1142) procedure introduced into the Insolvency Act 1986 (IA 1986) by the Small Business, Enterprise and Employment Act 2015 and further detailed in the Insolvency (England and Wales) Rules (SI 2016/1024) ( www.practicallaw.com/w-004-2254) (IR 2016).

The decision procedures and deemed consent procedure operate, and replace previous methods of obtaining decisions and consent from creditors and certain others, with effect from 6th April 2017 subject to limited transitional provisions. For more on transitional provisions, see Practice note, Insolvency (England and Wales) Rules 2016: transitional provisions ( www.practicallaw.com/w-004-1548) .

Our materials include practice notes and standard forms which Practical Law has produced to assist subscribers in navigating the requirements of the IR 2016, and changes to primary legislation being brought into effect at the same time, in seeking decisions from creditors (or in some circumstances contributories) in insolvency proceedings.

This toolkit also includes notes for the standard forms to which we link in this toolkit.

In this toolkit, unless we state otherwise in any case, a reference to a rule is to a rule of the IR 2016.

In this toolkit we use the term decision process as an umbrella term to refer to both decision procedures and deemed consent.

 

Overview materials on legislation introducing decision procedures and deemed consent

For information on the introduction of the IR 2016 and primary legislation giving rise to changes, on 6 April 2017, in the way in which decisions are put to and reached by creditors and others in insolvency proceedings, see Practice notes:

 

Materials on decision procedures, deemed consent and communicating with creditors

For information on the changes, which take effect on 6 April 2017, to the ways in which decisions are put to and reached by creditors and others in insolvency proceedings, see:

 

Which procedure to use?

Certain decisions must be taken by one or more specified decision processes. For example:

  • A decision of the creditors on the appointment of a liquidator in a creditors' voluntary liquidation can only be made through either the deemed consent procedure or a virtual meeting (rule 6.14 ( www.practicallaw.com/w-004-3026) , IR 2016):

  • A decision to approve a proposed company or individual voluntary arrangement cannot be made by deemed consent (sections 3(3) ( www.practicallaw.com/0-505-8236) and 257(2A) ( www.practicallaw.com/3-508-3442) , IA 1986).

  • A decision on the remuneration of an insolvency office-holder cannot be made by deemed consent (sections 246ZF(2) ( www.practicallaw.com/w-005-3824) and 379ZB(2), IA 1986).

  • Deemed consent cannot be used more than once for the same decision (sections 246ZF(5)(b) and 379ZB(5)(b), IA 1986).

  • Deemed consent cannot be used where the court orders that a decision about the matter is to be made by a qualifying decision procedure (sections 246ZF(1)(b) and 379ZB(1)(b), IA 1986).

  • Deemed consent cannot be used where a decision is required by IA 1986 or IR 2016 to be made by a qualifying decision procedure (sections 246ZF(1)(a) and 379ZB(1)(a), IA 1986).

We have attempted in our materials on specific aspects of insolvency law and practice to note requirements where they occur and are relevant to our materials, but subscribers should ensure that the decision process which they intend to use is available in the specific circumstances.

 

Standard forms on decision making processes produced by Practical Law Restructuring and Insolvency

Schedule 4 to the Insolvency Rules 1986 (SI 1986/1925) ( www.practicallaw.com/8-503-9357) provided a suite of prescribed statutory forms to be used.

Under the IR 2016 prescribed forms are no longer provided and instead individual rules set out the content requirements of documents.

Practical Law has produced a number of standard documents that are provided to assist subscribers in drafting documents that comply with the relevant provisions of the IR 2016 and the IA 1986. They should be used by reference to the Guidance notes and Use of these documents: Practical Law disclaimer.

Corporate insolvency

Individual insolvency

Guidance notes

Marginal notes and headings

We have included guidance notes and other observations for the draftsperson on the left hand side of the form. Subscribers should consider and determine for themselves the extent to which they conclude it is helpful to retain these notes in their completed documents.

Rule 1.29(e) ( www.practicallaw.com/w-004-2603) requires that all notices must state the section of the Act including where applicable the paragraph of Schedule A1 or B1 to the IA 1986, or the rule of the IR 2016, under which the notice is given. To deal with these requirements:

  • We have included these details under the heading, and placed there definitions and aids to construction of the legislative provisions referred to.

  • The forms also contain, at the top left corner, the main rule identifiers, but do not refer exhaustively to all potentially relevant rules.

Editorial decisions

We have, in producing these forms, made editorial decisions on the following matters:

  • The extent to which the inclusion of extracts from the IR 2016 satisfy requirements of the IR 2016 which require certain matters to be explained in the relevant notice or document: for example, a notice to creditors in respect of a decision procedure on a CVA or IVA should include, under rule 15.8(3)(j) ( www.practicallaw.com/w-004-2728) , a statement of the effects of provisions about voting rights and majorities: in this example we have produced annexed partial extracts from the relevant rules of the IR 2016 (rules 15.28 ( www.practicallaw.com/w-004-2696) , 15.31 ( www.practicallaw.com/w-004-2701) and 15.34 ( www.practicallaw.com/w-004-2704) , IR 2016) rather than attempted to explain or paraphrase further.

  • The extent to which terms used and defined in the IR 2016 can be used in the relevant document or notice (for example, the expressions virtual meeting, physical meeting and decision date) without separate or additional explanation or express reference back to the IR 2016 definition.

  • The extent to which departure from the strict order of the presentation of information will be free of criticism: in some instances we have added information at a different point in the order stated in the relevant rule of the IR 2016, where it seemed to us to be logical to do that: the requirement that material be presented in the order stated in the relevant rule is set out in rule 1.8(2) ( www.practicallaw.com/w-004-2808) of the IR 2016, but that rule, and rule 1.9 ( www.practicallaw.com/w-004-2820) , allow some departure from that.

Details of the convener

Ordinarily the office-holder will be the convener in the context of Part 15 of the IR 2016 and as such the person required to deliver notices to creditors pursuant to rule 15(2) ( www.practicallaw.com/w-004-2699) . Rule 1.29(e) requires that any notice delivered by the office-holder contains contact details for the office-holder. Rule 1.6 ( www.practicallaw.com/w-004-2739) of the IR 2016 specifies that such contact details must comprise the postal address for the office-holder and either an email address or a telephone number through which the office-holder can be contacted.

It is not strictly a requirement to set out the status of the convener where the convener is not an office holder, but is, for example a director. However it may be helpful to include this information and we have catered for that. Where the convener is an office holder or the notice relates to a proposed office holder and the document is in electronic form it should include the identification requirements in rule 1.6 of the IR 2016 (the name of the office holder and the nature of the appointment). (rule 1.5 ( www.practicallaw.com/w-004-2730) , IR 2016).

Requirement for proof of debt in a decision in a voluntary arrangement

We have taken the view that a creditor who is being asked to approve a proposal for a voluntary arrangement (individual (IVA) or company (CVA)) must submit a proof of debt in order for his vote to be taken into account (and that the time by which a proof must be submitted, despite silence on the point in the IR 2016, is the same as in other insolvency processes). The IR 2016 are not without some element of inconsistency on the point. See, for example, rules 15.9(b) ( www.practicallaw.com/w-004-2729) , 15.8(3)(e) ( www.practicallaw.com/w-004-2728) , 15.28(1 and (5) ( www.practicallaw.com/w-004-2696) and 15.33 ( www.practicallaw.com/w-004-2703) of the IR 2016. Accordingly, notices of decision procedures for CVAs and IVAs are presented on the basis that rules 15.8(3)(f) and (g) also apply to them.

Proxy forms

Where there is no meeting, proxies are not relevant and a blank proxy form should not be sent with the notice (rule 15.8(5), IR 2016).

Voting by correspondence

The IR 2016 are silent on the way and extent to which a convener can specify how a creditor should or may correspond, so as to register a vote in a decision being made by correspondence (and no definition of "correspondence" or similar expression is set out in the IA 1986 or the IR 2016). We have left blank spaces for completion by the convener accordingly. It is unclear whether, if methods of correspondence are provided for by the convener, other methods would nevertheless be acceptable, or required to be accepted.

The right to require attendance

We have, in documents convening meetings, inserted wording designed to deal with the right of certain office-holders to require present or former officers, or (in a bankruptcy) the bankrupt, to attend the meeting, as contemplated by rule 15.14 ( www.practicallaw.com/w-004-3002) of the IR 2016. In inserting the requirement under rule 15.14 into the convening notices, it may be that the requirements of rule 1.8 (prescribed format) are not strictly complied with.

General requirements

Subscribers will need to consider the application of Part 1 of the IR 2016 generally and specifically rule 1.29 ( www.practicallaw.com/w-004-2603) of the IR 2016, which applies to all standard notices to be delivered by an office holder.

Subscribers will also need to consider any applicable timing requirements for the delivery or deemed delivery of documents when sending out notices and setting decision dates.

Use of these documents: Practical Law disclaimer

The documents will need to be adapted to users' specific circumstances and are intended to be used solely as a starting point to be adapted as necessary by users. While every effort has been made to ensure that the standard documents signpost as far as possible the procedural requirements of the process in which it is to be used, Practical Law and Thomson Reuters do not warrant or represent that these documents are a definitive statement of all the formal requirements of the process in which they are designed to be used. This disclaimer is without prejudice to the general disclaimer in our Terms of Use ( www.practicallaw.com/3-503-2117) .

 
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