Rewritten code for Scots insolvency rules in force from April

Corporate insolvency rules in Scotland change in April, with the coming into force of two new codes reflecting the respective competences of the Scottish and Westminster Parliaments.

From 6 April 2019 the Insolvency (Scotland) (Receivership and Winding up) Rules 2018 and the Insolvency (Scotland) (Company Voluntary Arrangement and Administration) Rules 2018 modernise and consolidate the legal position in Scotland. This follows a similar exercise in England & Wales in 2016.

The first set of rules make provision in relation to the devolved process for receivership and the mixed-competence process for winding-up. The latter set cover the reserved insolvency processes of company voluntary arrangements (CVAs) and administration.

The new rules broadly derive from the Insolvency (Scotland) Rules 1986. However there is rarely an exact match as the structure of the 2018 Rules differs from the 1986 Rules and the language has been modernised in a bid to make the provisions easier to digest.

Their structure is in line with the Insolvency (England and Wales) Rules 2016, and implements some of the changes by the Small Business, Enterprise and Employment Act 2015 such as the removal of meetings as the default decision mechanism and the ability for creditors to opt-out of receiving correspondence. Other changes include:

• provision to allow debts of £1,000 or less (“small debts”) to be treated differently for dividend purposes;
• enabling greater use of websites by office holders;
• enabling greater use of electronic communication;
• fixed term progress reporting;
• enabling office holders to report to creditors that remuneration will not be claimed in an accounting period, rather than making an application to defer the accounting period;
• alignment of accounting periods and reporting in winding up procedures, commencing from the appropriate date of appointment;
• change of date for creditor claims purposes for winding up to the date a company goes into liquidation;
• a change to filing requirements where an administration converts to a creditors’ voluntary liquidation;
• increased privacy for private individuals who are creditors in insolvency proceedings;
• removal of statutory forms and the prescription of contents of notices to enable e-delivery.

Although the rules are now contained in two instruments, care has been taken to ensure that the layout, language and common parts of the instruments are as similar as possible.

In order to assist users, the Accountant in Bankruptcy has published a table of destinations for both sets of rules. It is hoped that this will assist users who have been using the 1986 Rules for many years and have a good working knowledge of the layout and provisions. The table indicates the destinations of provisions in the 1986 Rules.

Click here to view the table of destinations.