Reviewed: 6th April 2017
The Insolvency Act, 1986, has undergone numerous changes during the last 31 years, including 28 different amendments. The government has recognised the need to consolidate this piece of legislation, as well as modernise and streamline insolvency practices using current technology.
Significant cost-savings are expected as a result of the changes, which in turn mean increased dividend payouts for unsecured creditors. An additional benefit is that directors can use technology to begin the process online, without the previous requirements delaying procedures.
So, in more detail, how do these changes in legislation affect your experience of company insolvency as a director?
This is a significant change to what was often a time and money drain under the old system. In-person meetings with creditors were costly, and rarely attended by more than a few creditors.
With no obligation to convene an initial creditors’ meeting (Section 98 meeting) unless requested by a certain number or proportion of creditors, the liquidation process can be expedited by directors.
Documents and information are sent out to creditors by email, and can also be accessed via other electronic means. The requirement for a final meeting of creditors has also been removed.
By making electronic communication the default method of contact, procedures naturally accelerate during a liquidation process. Directors can also quickly answer the liquidator’s questions, and provide them with the necessary information about the company.
Standard communication methods now include email, electronic voting on decisions, and virtual meetings, as well as having access to a website specified by the liquidator with a view to downloading important documents.
When compared with the time taken to notify creditors of a physical meeting, post the information required for them to make a decision, and then hold the meeting, these new procedures will breathe fresh life into what was a slow and stagnant system.
The liquidator can now assume that creditors have agreed decisions as long as a specified number of them do not object (apart from in connection with setting the office-holder’s remuneration). If 10% of creditors (in number or by value), or 10 individual creditors, object to a decision, then the office-holder can move forward with the process.
As a director, you will benefit from a faster decision-making process using the new ‘deemed consent’ rule, in conjunction with the updated methods of communication which have replaced default use of the postal system.
Real Business Rescue offers a supportive and experienced team to help you liquidate your company. As a major part of Begbies Traynor Group, we have vast practical experience and the technical expertise needed to understand a complex financial situation.
When you contact us, we’ll arrange a free same-day meeting with one of our insolvency experts. Real Business Rescue provide director advice online, over the phone, or in-person at one of our 55 UK offices or a place of your convenience.
On a practical level, we will analyse your company’s assets and liabilities, and assess the consequences of liquidation for you and other directors on a personal level. This is an important aspect of insolvency, as if you are found to have acted wrongfully as a director, and have provided personal guarantees for any business loans, then there is a risk of personal liability.
There may be an investigation into director conduct following a liquidation process – a stressful and demanding situation for any director to deal with. Our experts at Real Business Rescue can guide you on your level of risk with regard to personal liability, and have the technical expertise to ensure you remain compliant with the rules of insolvency.
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