Proposals that could save creditors over 36m a year by cutting needless processes during insolvency proceedings have been announced in a consultation document published by Business Minister Jo Swinson today.
The proposals cut out unnecessary red tape without removing important protections for creditors, and include modernising the way in which insolvency practitioners (IPs) communicate with creditors.
The measures, outlined by the Insolvency Service in the consultation document, Red Tape Challenge changes to insolvency law to reduce unnecessary regulation and simplify procedures, also include:
– reducing the number of physical meetings of creditors (which are often poorly attended) by only requiring one where the office-holder thinks it necessary or where at least 10 per cent of creditors ask for one;
– reducing the role of the courts for consensual creditor petitions (where judicial input is not needed);
– using more electronic communication with creditors, with links to website information;
– reducing the need to seek prior approval of creditors for certain actions clearly in their interest;
– abolishing unnecessary IP record keeping requirements;
– allowing office-holders to rely on the insolvents records when paying small claims, reducing the need for creditors to complete claim forms;
– reducing costs by providing that where the cost of making a very small dividend payment exceeds a minimum amount, it is not made but instead should be used for wider benefit of creditors; and
– streamlining and modernising the process by which IPs report to the Secretary of State on the conduct of directors of insolvent companies.
Business Minister, Jo Swinson, said:
Businesses need to use modern practices to be able to compete in todays market place. Removing unnecessary barriers will reduce the cost of administering insolvencies and benefit creditors.
Business and Enterprise Minister, Michael Fallon, said:
Many of the proposals being consulted on were put forward by creditors and others affected by the law. This is an excellent example of stakeholders working together through the Red Tape Challenge to improve efficiency and benefit business.
Philip King, Chief Executive of the Institute for Credit Management, and insolvency Red Tape Challenge sector champion, said:
We believe that making insolvency processes more efficient and harnessing new technology to streamline the process still further will ultimately enhance the creditors position, reduce the overall cost of administrations, and further improve the relationship between creditors and IPs. We encourage the business community to respond to the consultation and let us know what they think of the deregulatory proposals.
The consultation will run for 12 weeks from 18 July 2013. Any changes to the current system will need legislation.
The Government is also progressing other measures that will help cut red tape and reduce unnecessary regulation, including those in the draft Deregulation Bill now going through Parliament.
Insolvency measures in the draft Deregulation Bill include:
– simplifying the procedure whereby the Secretary of State or official receiver obtains information on director misconduct, enabling information to be obtained directly from any person without requiring authority from the insolvency office-holder;
– amending procedures around the appointment of interim receivers, increasing creditor choice; and
– only requiring bankrupts in creditors petition cases to submit a Statement of Affairs where it is needed.