The Insolvency (Amendment) (No. 2) Rules 2002

Explanatory Note

(This note is not part of the Rules)

These Rules make a number of changes to the Insolvency Rules 1986. These are set out in the Schedule to these Rules.

Part 1 of the Schedule to these Rules makes a number of amendments to the provisions of Part 1 of the Insolvency Rules which relate to company voluntary arrangements. Many of these are consequential on amendments made to the Insolvency Act 1986 by the Insolvency Act 2000. In particular—

(a) a number of amendments are made in consequence of the bringing into force of section 389A of the Insolvency Act 1986 which creates the possibility of qualified persons other than insolvency practitioners acting as nominees or supervisors in relation to company voluntary arrangements (see for example, paragraph 5 of the Schedule);

(b) provision is made to permit the holding of the meetings of members and creditors on different days (previously they had to be held on the same day) (see paragraph 6 of the Schedule which amends Rule 1.13(3) of the Insolvency Rules 1986);

(c) the rules regarding creditors' entitlement to vote are amended so as to provide that creditors with unliquidated claims are always entitled to vote for £1 unless the chairman of the meeting agrees to put a higher value on the claim. This means that creditors with liquidated or unliquidated claims will be bound by an arrangement if for some reason they do not receive notice of the meeting;

(d) a number of amendments are made in consequence of the changes to the Insolvency Act 1986 by the insertion of a section 4A which provides that a voluntary arrangement is to have effect notwithstanding that the members of the company do not vote in favour of it (see for example paragraphs 13 and 14 of the Schedule to the Rules);

(e) a number of provisions are introduced in connection with the bringing into force of the provisions of the Insolvency Act 2000 which insert section 1A and Schedule A1 into the Insolvency Act 1986. These provisions allow the directors of eligible companies (broadly speaking, small companies) to obtain a moratorium with a view to obtaining the approval of a proposal for a voluntary arrangement.

Part 2 of the Schedule to these Rules makes a number of amendments to Part 4 of the Insolvency Rules 1986 so as to enable liquidators to recover the costs of bringing certain actions (eg under section 214 of the Insolvency Act 1986) from the assets of the company.

Part 3 of the Schedule to these Rules substitutes a new Part 5 of the Insolvency Rules 1986 which relates to individual voluntary arrangements. The new Part 5 takes account of amendments made to Part VIII of the Insolvency Act 1986 by the Insolvency Act 2000 which amends the provisions of the Insolvency Act 1986 relating to individual voluntary arrangements. The same amendments regarding voting rights are made as in relation to company voluntary arrangements.

Part 4 of the Schedule makes amendments to Part 6 of the Insolvency Rules 1986 so as to enable a trustee in bankruptcy to recover from the bankruptcy estate the costs of bringing certain actions (e.g actions under section 339 (transactions at an undervalue)).

Parts 5 and 6 of the Schedule make a number of amendments to Schedule 4 to the Rules which sets out the forms for use in connection with insolvency proceedings. Amendments are made to the forms for use in connection with voluntary arrangements.

The costs to business of the commencement of the provisions of the Insolvency Act 2000 are detailed in the Regulatory Impact Assessment prepared for that Act. Copies of the assessment are available from the Policy Unit, The Insolvency Service, 21 Bloomsbury Street, London WC1B 3QW.