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The new Insolvency Rules 2016 to apply to LLPs

The new Insolvency Rules 2016 will apply to LLPs in England and Wales from 8 December 2017, subject to minor transitional provisions.

The new rules will also apply where an Insolvency Practitioner is appointed in respect of an insolvent partnership or an insolvent estate of a deceased person in England and Wales on or after 8 December 2017.  This is subject to the court's discretion to apply the Insolvency Rules 1986 if the statutory demand was served or petition presented before this date. 

The changes are being made by the Insolvency (Miscellaneous Amendments) Regulations 2017 and the Insolvency (England and Wales) and Insolvency (Scotland) (Miscellaneous and Consequential Amendments) Rules 2017.

What is the effect of the changes?

These changes address a gap present in the legislation since the new rules came into effect on 6 April 2017.  The amendments will enable Insolvency Practitioners appointed in respect of LLPs, partnerships and insolvent estates to use the new deemed consent and alternative decision making procedures.  It will be easier for Insolvency Practitioners to communicate electronically with creditors in these proceedings and there will no longer be a requirement to use prescribed forms where the new rules apply.

There remain a number of specialist insolvency regimes that continue to operate by reference to the Insolvency Rules 1986 and which are not affected by the secondary legislation coming into force on 8 December 2017. 

Is there anything else to be aware of?

A number of other amendments to insolvency legislation also come into force on 8 December 2017.  For practical purposes, the most significant changes are:

  • An increase in the bankruptcy level for insolvent partners from £750 to £5,000;
  • The removal of Companies House Form 600 and replacement with prescribed information to be provided to the Registrar by a liquidator appointed in a voluntary liquidation;
  • The replacement of references to the original European Insolvency Regulation with references to the Recast Insolvency Regulation in the Cross-Border Insolvency Regulations 2006; and
  • The amendment of service requirements for a statutory demand served on an individual out of the jurisdiction. 

The amendments also confirm that:

  • The decision to form a creditors' or liquidation committee may be made either by the deemed consent procedure or by an alternative decision making procedure; and
  • Liquidators and trustees in bankruptcy are required to account to the Secretary of State at the conclusion of a liquidation or bankruptcy even where there is no final meeting.

What next?

The application of the new rules to LLPs, partnerships and insolvent estates addresses a gap in the legislation and clarifies when the new rules apply to these entities.  The other amendments go some way to addressing errors in the recent slew of substantive changes to insolvency law.  It is expected that further amending legislation and practice directions will be needed in the coming months.  We will continue to monitor developments.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at November 2017. Specific advice should be sought for specific cases. For more information see our terms & conditions.

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