New Practice Direction on Insolvency Proceedings
The revised Practice Direction on Insolvency Proceedings (PDIP) updated the 2014 Practice Direction by making reference to the Insolvency Rules 2016.
The revised Practice Direction on Insolvency Proceedings (PDIP) updated the 2014 Practice Direction by making reference to the Insolvency Rules 2016, taking into account recent case law and amendments in the CPR, identifying new arrangements for the distribution of insolvency matters across the different levels of the judiciary and clarifying the routes of appeal in insolvency cases.
The wave of changes brought in by the Insolvency (England and Wales) Rules 2016 (IR16) created a need for the existing insolvency procedure requirements to also be updated. The new PDIP came into force on 25 April 2018, replacing "all previous Practice Directions, Practice Statements and Practice Notes relating to insolvency proceedings" whilst running alongside the:
- Practice Directions of the Civil Procedure Rules (CPR).
- Practice Direction 51P – Pilot for Insolvency Express Trials.
- Practice Direction: Directors Disqualification Proceedings.
Distribution of court business
All applications must be brought in the High Court, with the exception of the following, which may now be brought in front of a District Judge in the County Court:
- Hearings of applications to set aside statutory demands.
- Unopposed creditors’ winding-up petitions.
- Unopposed bankruptcy petitions.
Drawing up of orders
The PDIP 2018 introduces a new requirement whereby all applications must be accompanied by draft orders. This essentially means that, whereas in the past the court would mainly draw up all orders, now the parties are responsible for drawing up all orders, unless the court directs otherwise.
Remuneration of office holders
There are new provisions requiring a fee estimate to be exhibited to any remuneration application. The Court may consider the views of any parties considered to have an interest in the assets.
The PDIP 2018 introduces two new provisions relating to administration applications and the Electronic Practice Direction 510 (PD 510):
- No out-of-court appointment of administrators can be effected outside court hours by using the Electronic Working online system;
- Administration applications submitted using the Electronic Working scheme will have an issue date and time correlating to the date and time on which the filing fees are paid.
Statutory demands must now follow as much as possible the HMCTS Form SD1. A petition will not be treated as having been presented until the Court fee and Official Receiver deposit has been paid. An additional requirement to give notice of the dismissal of a winding-up petition has been introduced (rule 7.23(1) of the IR 2016), although this can be dispensed with on request if the petition has not been previously gazetted, the company has gone into another insolvency process or the company agrees.
Applications for a validation order must now be made in the High Court before a District Judge or an ICC Judge. Failure to give appropriate notice of the application to the petitioning creditor and other relevant creditors is likely to result in the application being adjourned or dismissed.
Unlike with corporate insolvency, the PDIP 2018 does not state which HMCTS form should be followed; it does however refer to the HMCTS formfinder website for guidance. The service requirements are addressed by reference to rule 10.2 of the IR 2016 whereby “A creditor must do all that is reasonable to bring the statutory demand to the debtor's attention and, if practicable in the particular circumstances, serve the demand personally." If personal service is not practicable, the Court may make an order for substituted service by any other form of physical or electronic communication which will bring the statutory demand to the notice of the debtor.
Content of bankruptcy petition
The PDIP 2018 introduces a new requirement to state whether the statutory demand was served before 4pm on Monday to Friday or before noon on Saturday, if it has been personally served on the debtor.
An appeal of an Adjudicator’s refusal to make a bankruptcy order will be treated as a first hearing of the matter. No prior permission to appeal will be required. The appeal filing procedures have also been updated to correspond with the provisions of Practice Direction 52B of the CPR (Appeals in the County Court and High Court).
The various changes detailed in this update are largely self-explanatory and they achieve some welcome reconciliation with the new IR 2016. It is, however, likely that further clarification will be required in relation to the recommendation to use the standard HMCTS forms, particularly when it comes to statutory demands. In addition, further details would be welcome in relation to administration applications, as well as the Electronic Working processes within the context of insolvency procedures.
If you have any questions or would like to know more about our legal update, please get in touch with your usual Weightmans contact or the author of this update, Luiza Balan, Solicitor, on +44 (0)20 7822 1997 or firstname.lastname@example.org.