The Insolvency (EU Exit) (Scotland) (Amendment) Regulations 2019

Scottish Statutory Instruments

2019 No. 94

Exiting The European Union

Insolvency

The Insolvency (EU Exit) (Scotland) (Amendment) Regulations 2019

Made

13th March 2019

Coming into force in accordance with regulation 1

The Scottish Ministers make the following Regulations in exercise of the powers conferred by paragraph 1(1) and (3) of schedule 2 and paragraph 21(b) of schedule 7 of the European Union (Withdrawal) Act 2018 M1 and all other powers enabling them to do so.

In accordance with paragraph 1(7) of schedule 7 of that Act, a draft of this instrument has been laid before and approved by resolution of the Scottish Parliament.

Marginal Citations

M1 2018 c.16.

Citation and commencement S

1.  These Regulations may be cited as the Insolvency (EU Exit) (Scotland) (Amendment) Regulations 2019 and come into force on exit day.

Commencement Information

I1 Reg. 1 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1

PART 1 S Amendments to primary legislation

Amendment of the Insolvency Act 1986 S

2.—(1) The Insolvency Act 1986 M2 is amended as follows.

(2) In section 51 (power to appoint receiver)—

(a) in subsection (1)(b) omit “other than the United Kingdom”, and

(b) in subsection (6) at the end of the definition of “the EU Regulation” insert “ as that Regulation has effect in the law of the European Union ”.

Commencement Information

I2 Reg. 2 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1

Marginal Citations

M2 1986 c.45. Relevant amendments have been made by S.S.I. 2011/140 and S.S.I. 2017/210.

Amendment of the Bankruptcy and Diligence etc. (Scotland) Act 2007 S

3.—(1) The Bankruptcy and Diligence etc. (Scotland) Act 2007 M3 is amended as follows.

(2) In section 45 (effect of floating charges on winding up)—

(a) omit subsection (2),

(b) in subsection (7)—

(i) omit paragraph (a), and

(ii) in paragraph (b), omit “in any other case,”, and

(c) omit subsection (8).

Commencement Information

I3 Reg. 3 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1

Marginal Citations

M3 2007 asp 3. Section 45 is not yet in force.

Amendment of the Bankruptcy (Scotland) Act 2016 S

4.—(1) The Bankruptcy (Scotland) Act 2016 M4 is amended as follows.

(2) In section 2 (sequestration of estate of living debtor) omit subsection (1)(b)(ii) and (iii).

(3) In section 5 (sequestration of estate of deceased debtor) omit paragraphs (c) and (d).

(4) In section 6 (sequestration of other estates) omit subsections (3)(b)(i) and (ii), (4)(c)(i) and (ii) and (7)(b)(i) and (ii).

(5) In section 11 (debtor application: provision of information)—

(a) in subsection (1)(a), for “another member State” substitute “ a member State (other than Denmark) ”,

(b) for subsection (1)(b) substitute—

“(b) if the debtor's centre of main interests is situated in a member State (other than Denmark), whether or not the debtor possesses an establishment in the United Kingdom.”,

(c) in subsection (2)(a), for “another member State” substitute “ a member State (other than Denmark) ”,

(d) for subsection (2)(b) substitute—

“(b) if the debtor's centre of main interests was situated in a member State (other than Denmark), whether or not the debtor possessed an establishment in the United Kingdom.”, and

(e) omit subsection (3).

(6) In section 12 (petition for sequestration of estate: provision of information)—

(a) in subsection (1)(a), for “another member State” substitute “ a member State (other than Denmark) ”,

(b) for subsection (1)(b) substitute—

“(b) if the debtor's centre of main interests is situated in a member State (other than Denmark), whether or not the debtor possesses an establishment in the United Kingdom.”, and

(c) omit subsection (2).

(7) In section 13 (further provisions relating to presentation of petitions)—

(a) in subsection (2), omit paragraph (b)(ii) and (iii),

(b) in subsection (3), omit paragraph (b)(ii) and (iii), and

(c) in subsection (4)—

(i) after paragraph (b)(i), insert “ or ”, and

(ii) omit paragraph (b)(iii) and (iv).

(8) Omit sections 14A and 14B M5 .

(9) In section 15 (jurisdiction) omit subsection (9).

(10) In section 16 (meaning of “apparent insolvency”) omit subsections (1)(d) and (7)(c).

(11) In section 79(2) (provision supplementary to section 78 and interpretation of Part 5) omit the words “and to section 231”.

(12) In section 128 (voting and drawing a dividend) omit subsections (4) to (7).

(13) In section 129 (priority in distribution) omit subsection (8).

(14) In section 170 (protected trust deeds - documents to be sent to creditors) omit subsection (1)(d)(v).

(15) Omit sections 190 to 192, 207, 208 and 226.

(16) In section 228(1) (interpretation)—

(a) omit the following definitions—

(i) “creditor”,

(ii) “main proceedings”,

(iii) “member State insolvency practitioner” M6 ,

(iv) “secondary proceedings” M7 ,

(v) “temporary administrator”, and

(vi) “territorial proceedings”, and

(b) in the definition of “the EU insolvency proceedings regulation” at the end insert “ as it forms part of domestic law on and after exit day ”.

(17) Omit section 231 (proceedings under EU insolvency proceedings regulation: modified definition of estate).

(18) In schedule 5 (information to be included in the sederunt book) omit paragraph 3A M8 .

Commencement Information

I4 Reg. 4 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1

Marginal Citations

M4 2016 asp 21. Relevant amendments have been made by S.S.I. 2017/210.

M5 Sections 14A and 14B were inserted by regulation 4(8) of the Insolvency (Regulation (EU) 2015/848) (Miscellaneous Amendments) (Scotland) Regulations 2017 (S.S.I. 2017/210).

M6 The definition of “member State insolvency practitioner” was inserted by regulation 4(21)(g) of S.S.I. 2017/210.

M7 The definition of “secondary proceedings” was substituted by regulation 4(21)(h) of S.S.I. 2017/210.

M8 Paragraph 3A was inserted by regulation 4(24) of S.S.I. 2017/210.

PART 2 S Amendments to secondary legislation

Amendment of the Bankruptcy Fees (Scotland) Regulations 2018 S

5.—(1) The Bankruptcy Fees (Scotland) Regulations 2018 M9 are amended as follows.

(2) In regulation 2 omit the definition of “member State insolvency practitioner”.

(3) In Part 2 of the Table of Fees in the schedule (fees for other functions of the Accountant in Bankruptcy) omit item 21 (fee for conversion of a trust deed into sequestration).

Commencement Information

I5 Reg. 5 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1

Marginal Citations

M9 S.S.I. 2018/127. A relevant amendment has been made by S.S.I. 2017/210.

Amendment of the Public Services Reform (Insolvency) (Scotland) Order 2016 S

6.  In the Public Services Reform (Insolvency) (Scotland) Order 2016 M10 omit article 15(6)(b) and the word “or” immediately preceding it.

Commencement Information

I6 Reg. 6 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1

Marginal Citations

M10 S.S.I. 2016/141. A relevant amendment has been made by S.S.I. 2017/210.

Amendment of the Bankruptcy (Scotland) Regulations 2016 S

7.—(1) The Bankruptcy (Scotland) Regulations 2016 M11 are amended as follows.

(2) In schedule 1 (forms), in form 11 (statement of claim by creditor) omit note 4 (particulars of each debt: claim by Member State liquidator).

(3) In schedule 2 (register of insolvencies), section B (protected trust deeds for creditors)—

(a) after “Regulation (EU) 2015/848” insert “ (as it forms part of domestic law on and after exit day) ”, and

(b) omit from “unless the granter” to “within the meaning of the said EU Regulation”.

Commencement Information

I7 Reg. 7 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1

Marginal Citations

M11 S.S.I. 2016/397. Relevant amendments have been made by S.S.I. 2017/210.

Amendment of the Bankruptcy (Applications and Decisions) (Scotland) Regulations 2016 S

8.—(1) The Bankruptcy (Applications and Decisions) (Scotland) Regulations 2016 M12 are amended as follows.

(2) Omit regulation 17 (conversion of protected trust deed into bankruptcy).

(3) In the schedule, omit forms 6 (conversion of protected trust deed into bankruptcy: section 190 application) and 7 (conversion of protected trust deed into bankruptcy: section 192 award).

Commencement Information

I8 Reg. 8 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1

Marginal Citations

M12 S.S.I. 2016/295. Relevant amendments have been made by S.S.I. 2017/210.

Saving S

9.—F1 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) The amendments made by regulations 2 to 8 do not apply [F2 in respect of any insolvency proceedings and actions falling within Article 67(3)(c) of the withdrawal agreement].

F3 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F1 Reg. 9(1)(a) omitted (31.12.2020 immediately before IP completion day) by virtue of The Insolvency (Amendment) (EU Exit) (Scotland) Regulations 2020 (S.S.I. 2020/337), regs. 1, 2(2)(a)

F2 Words in reg. 9(2) substituted (31.12.2020 immediately before IP completion day) by The Insolvency (Amendment) (EU Exit) (Scotland) Regulations 2020 (S.S.I. 2020/337), regs. 1, 2(2)(b)

F3 Reg. 9(3) omitted (31.12.2020 immediately before IP completion day) by virtue of The Insolvency (Amendment) (EU Exit) (Scotland) Regulations 2020 (S.S.I. 2020/337), regs. 1, 2(2)(c)

Commencement Information

I9 Reg. 9 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1

JAMIE HEPBURN

Authorised to sign by the Scottish Ministers

St Andrew's House,

Edinburgh

Explanatory Note

(This note is not part of the Regulations)

These Regulations address failures of the law to operate effectively and other deficiencies in devolved legislation on cross-border insolvencies arising from the withdrawal of the United Kingdom from the European Union. They include changes consequential on amendments made to the EU Regulation on insolvency proceedings ((EU) 2015/848) (“the EU Regulation”) by the Insolvency (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/146) (“the UK Regulations”).

The EU Regulation determines in which member State main insolvency proceedings may be opened and provides for decisions opening proceedings to be recognised in other member States. Main proceedings may only be opened in the state where the centre of the debtor's main interests (“COMI”) is located. Secondary proceedings may be brought in a state where the debtor has an establishment. The EU Regulation makes other provisions to facilitate the operation of cross-border insolvency proceedings including for co-operation between courts and insolvency practitioners.

The UK Regulations address deficiencies that will arise from the absence of mutual application of the EU Regulation between the UK and the EU member States from exit day. They amend the EU Regulation (as it forms part of domestic law on and after exit day) by repealing the majority of its provisions, which are based on mutual application between member States, and removing the existing restrictions on opening insolvency proceedings where COMI is in a member State. They also make other changes to domestic insolvency law, including to reserved and devolved aspects of Scots insolvency law.

The UK Regulations retain the jurisdictional test based on COMI as an additional ground for jurisdiction to open insolvency proceedings. This applies from exit day in addition to any grounds to open such proceedings which apply in the laws of any part of the UK.

These Regulations address legislative deficiencies arising in the devolved areas of receivership, the effect of floating charges on winding up, bankruptcy and protected trust deeds.

Regulation 2 amends section 51 of the Insolvency Act 1986, which sets out that it is competent for the holder of a floating charge to appoint a receiver over the property of a company where either the Court of Session has jurisdiction to wind up the company, or a court of a member State other than the UK has jurisdiction under the EU Regulation to open insolvency proceedings in respect of the company. The amendments make clear the reference to the EU Regulation is to the EU Regulation as it has effect in the law of the EU (rather than as it is retained in domestic law from exit day), and remove a reference to the UK as an EU member State.

Regulations 3 and 4 make amendments to the Bankruptcy and Diligence etc. (Scotland) Act 2007 and the Bankruptcy (Scotland) Act 2016 (“the 2016 Act”) which are consequential on the amendments to the EU Regulation made by the UK Regulations. The amendments to sections 11 and 12 of the 2016 Act reflect that, under the UK Regulations, the retained jurisdictional test based on COMI will apply where the debtor's COMI is in a member State of the EU other than Denmark, since Denmark is not a party to the EU Regulation.

Regulations 5 to 8 make amendments to secondary legislation which are consequential on the amendments to the EU Regulation made by the UK Regulations.

Regulation 9 provides that the amendments made by regulations 2 to 8 do not apply to proceedings opened before exit day.

A partial business and regulatory impact assessment was prepared in respect of the Regulations, copies of which can be obtained from the Accountant in Bankruptcy, 1 Pennyburn Road, Kilwinning.