Insolvency: Transition from the COVID measures

Two important pieces of legislation have recently been proposed and form key planks in our transition out of the pandemic towards a “new normal” for insolvency law.

The Coronavirus (Scotland) Acts (Early Expiry of Provisions) Regulations 2022 came into force on 29 March 2022. As the name suggests, the regulations end certain temporary provisions of the Coronavirus (Scotland) Acts. Notably:

• They bring to an end the extended notice periods relating to evictions from residential properties.
• In commercial tenancies, they bring to an end the extension of irritancy notice periods from 14 days to 14 weeks.

In both cases, the provisions expired on 30 March 2022. Consequently, notices served prior to that date will be subject to the longer notice periods.

It is understood that the intention is for the remaining operative provisions of the 2020 Acts to expire on 30 September 2022. However, the regulations in that regard have not been laid as yet. Timescales may depend on the passage of the Coronavirus (Recovery and Reform) (Scotland) Bill.

That bill is closely related to these regulations. It proposes the extension or permanent adoption of a number of measures previously enacted under the Coronavirus Acts of 2020. For the purposes of this briefing, Parts 3 and 4 are of most interest.

The bill is currently at stage 1 of the legislative process. Therefore, it is important to note that what is written here may change before the bill is passed.

Bankruptcy provisions

Part 3 covers (amongst other matters) bankruptcy reforms. Arguably, the most important change it introduces is the increase in the threshold for a creditors’ bankruptcy petition from £3,000 to £5,000. During the pandemic this had temporarily been raised to £10,000. It should be noted that the £3,000 limit has been in force since 2008, and so was perhaps due for a refresh. The proposed £5,000 limit largely aligns Scotland with the position in England & Wales.

In addition, the bill proposes to insert a new section into the Bankruptcy (Scotland) Act 2016 dealing with service of documents. Most importantly, it proposes to make permanent the ability to serve documents by electronic transmission, provided it is “effected in a way that the recipient has indicated to the sender that the recipient is willing to receive the document”. Electronic service and intimation of documents has been a success story of the pandemic. Certainly, it makes sense for this to become a permanent fixture.

The bill further proposes to make permanent the ability of the trustee to hold creditors’ meetings remotely. Given the rise of videoconferencing technology during the pandemic, this does not seem particularly controversial. It is also proposed that the temporary provisions allowing the swearing of oaths and affirmations remotely be retained.

Use of electronic means is indeed a theme of the bill, and ss 24 and 25 propose electronic submission of deeds to Registers of Scotland and electronic signature of documents bound for the Register of Inhibitions. Both sections reflect the measures in place during the pandemic and are considered to have been effective.

Tenancies

Part 4 of the bill covers tenancies. The key point here is the proposal to remove mandatory grounds of eviction and to render all grounds for eviction as discretionary, thus making permanent the changes introduced in the 2020 Acts. The bill also provides for the introduction of a pre-action protocol in relation to actions for recovery of possession of rented properties. 

The detail of that protocol will be contained in regulations made by the Scottish ministers, but will cover proceedings under the Private Housing (Tenancies) (Scotland) Act 2016, and the Housing (Scotland) Act 1988. The bill states that the protocol may cover information that should be provided by a landlord to a tenant, the steps to be taken by a landlord pre-litigation and any other matters that the Government considers appropriate. 

A possible model is the pre-action requirements under the Conveyancing & Feudal Reform (Scotland) Act 1970. However, it’s fair to say that this has not been an unqualified success since it was introduced.

In summary, it appears that the bill retains a number of elements of the temporary coronavirus provisions which have worked well and in particular with regard to the use of electronic and remote solutions within the bankruptcy and legal processes. The final shape of the bill is awaited on its passage through the Parliament, but it is not considered that the elements set out above are likely to be particularly controversial.