Small Business, Enterprise and Employment Bill

Written evidence submitted by (SB 28)

My organisation provides back-office support to insolvency practitioners and lawyers, as well as creditor information and publicity for insolvency cases to those with an interest.

This submission concentrates on the proposals in relation to insolvency reforms (Part 10 of the Bill), as this is the area in which we have most professional expertise.

Our representations relate to the processes for informing creditors of the existence and conduct of insolvency matters, with an eye on the efficiency and cost-effectiveness of notification, ensuring that maximum visibility is given to proceedings, and to the processes for decision-making in the initial stages of insolvency matters.

We hope that this document will be useful in considering what provisions should be included in the Bill, and also in the amendments to the Insolvency Rules that will consequently be necessary to give full effect to the changes that the Bill will make to the Insolvency Act.

The representations below relate to the proposals contained within clauses 108-114 of the Bill.

The value of creditor meetings

1. I do not think that the plan to generally remove the requirement to hold creditors meetings in accords with the Government’s stated aim to have greater involvement and engagement for creditors in insolvency proceedings. Indeed, I feel that creditors may consider this step as a barrier to their inclusion in the insolvency process.

2. From the experience I have of creditor meetings (both as a creditor in a number of cases and from discussions with other attendees and insolvency practitioners) I believe they provide a valuable opportunity for information to be shared about how a business has operated prior to it becoming the subject of insolvency proceedings.

3. Many creditors of a company are suppliers and are therefore in competition with other suppliers. For this reason they are naturally wary about discussing their business and their current customers. It is only when a company becomes insolvent the supplying creditors (who are otherwise in commercial competition with each other) have an interest in disclosing and discussing commercial information with fellow creditors.

4. Attendance at a meeting of creditors – either physical or by video-conference – is the perfect opportunity to discover and share information that may be of vital importance to the insolvency practitioner for understanding how a business has operated, assist in tracing of assets and identifying conduct that may be worthy of further investigation.

5. A significant amount of the information that will be shared and discussed at a creditor meeting is, in my view, unlikely to be disclosed in any other way. As an example a creditor may have a hunch that something untoward has happened in the course of his dealings with a company, but does not have concrete evidence that the law has been breached. In these circumstances informal verbal discussion with other creditors and/or the insolvency practitioner can be of great value in identifying common themes in the way the business of the company has been conducted.

6. One of the reasons for proposing to remove creditor meetings as a default seems to be that the cost (for hiring a meeting room and the administration time) is felt to be too high. From personal discussions I understand that the administration time is marginal, and much of it would be incurred in any alternative mechanism anyway – contacting creditors individually, counting votes – and that internal meeting room hires are often not charged.

7. Having a licensed insolvency practitioner present is of great benefit to the creditors so that they can discuss concerns verbally and informally, to establish whether something untoward has occurred. Many creditors are not familiar with the finer points of company law, so having the opportunity to discuss with a qualified insolvency practitioner, without having to have a formal professional consultation with a lawyer or accountant, is a useful measure.

8. In conclusion on this topic I very strongly believe that every insolvency case should at the very least have an initial creditors meeting. I also believe that the invitation to creditors to attend the meeting should be worded to emphasise the value of investigating the affairs of the company fully, that creditors should feel free to discuss anything with fellow creditors and in confidence with the insolvency practitioner, and that it will be generally worthwhile for every creditor to participate.

The Gazettes (London Gazette, Edinburgh Gazette and Belfast Gazette)

9. The Gazette is well-placed to inform everyone (creditors, members, financial institutions, utilities, insolvency practitioners and others) of key insolvency events, both online and in print. It is currently the case that notices are published in the Gazette (known as ‘Gazetting’) in relation to most creditor meetings, appointments, intended dividends and final meetings. It is a modern, cost-effective and official method of disseminating statutory information.

10. The Gazette is used as a key reference source by those seeking information about insolvency events, as well as by those providing information to creditors and the like. I understand that the Insolvency Service has a good working relationship with the Gazette, and that the Gazette is currently developing their website further in relation to suggestions from the insolvency and credit management sectors.

11. As part of the development of the Gazette website information is available in multiple formats for easy re-use by third parties. With the ability for users to register free of charge to receive alerts to particular notices, and to save searches, it is much easier for information that is published in the Gazette to be disseminated than previously was the case.

12. The requirements for Gazetting each specific insolvency event are contained in the legislation, and are split between the Insolvency Act and the Insolvency Rules. There are no specific references to publishing notices in the Gazette in the Bill, but some of the provisions in the Bill would have the (perhaps unintended) consequence of introducing gaps in the chain of Gazetted events in many insolvency procedures. It is important that the value and comprehensiveness of the data published in the Gazette is not unintentionally diminished.

13. In November 2011 the Insolvency Service proposed to remove the requirement for the Gazetting of a notice of presentation of a winding-up petition. In response Dr Stephen Baister, Chief Bankruptcy Registrar of the High Court, gave a considered response (Accountancy Age, 19 January 2012) strongly against this and other aspects of the proposal.

14. While I do not believe (as stated in this submission) that it is a sensible move to remove physical creditor meetings in all circumstances, I would strongly suggest that if such a move is made then there should be introduced a requirement to Gazette a notice stating what process is taking place.

15. Similarly, at the conclusion of most insolvency cases there is currently published a notice of the Final Meeting so that interested parties are aware that the case is being closed. As the Final Meeting is proposed to be abolished, I would suggest that a substitute requirement to Gazette a notice stating that the case is to be closed and the final report is to be issued would have value for all concerned.

16. Given the comprehensive nature of the Gazette and that it is freely available to view, it could even be considered that certain creditor communications (such as the availability of the final report) could be given solely by way of Gazette notice. This would lead to a saving in administration time (and cost) for the insolvency practitioner’s staff as well as avoiding printing and postal charges.

17. As an example, this option already exists for a notice of End of Administration (see Paragraph 80(5) of Schedule B1 to the IA1986) and standardising it as an option in the conduct of Voluntary and Compulsory Liquidations as well as Bankruptcy cases would seem a logical step.

October 2014

Prepared 15th October 2014