Key changes and their implications in the Insolvency Rules 2016

Key changes and their implications in the Insolvency Rules 2016

Stephanie Tam for

The Insolvency Rules 2016 was laid before parliament and published on 25 October 2016.  The rules will come into force on 6 April 2017 with an aim to consolidate, modernise and make more consistent the existing rules, namely the Insolvency Act 1986, and their 28 amendments into a single set of rules.


Key changes


The new rules specify alternative forms of decision making. For example, Part 1 of the 2016 Rules sets out what should be included in various documents and notices instead of statutory forms. In terms of creditors’ meetings, Part 15 of the 2016 Rules sets out a new decision making regime. In particular, Rules 15.7 sets out the procedure where an officeholder writes to the creditors with a proposal and does not receive objections from 10% of creditors in value, the proposal is deemed to be approved unless the insolvency legislation or the court require the use of a “creditors’ decision making procedure”.


Under 2016 Rules, an officeholder cannot summon physical creditors meeting unless requested to do so by either 10% of the creditors in value, 10% of the total number of creditors or 10 individual creditors, compared to heavy reliance on physical meetings under the 1986 Act.  In addition, the new rules update the language, for example, references to “shall in the current rules are to be replaced by “must” in line with modern practice which uses “must” to indicate an obligation.


Furthermore, currently an officeholder cannot correspond electronically post insolvency. The new rules change this so that where e-mail was customarily used before the insolvency, that method of communication can continue post insolvency, enabling modern methods of communication. Consequently, this change will help encourage e-communication which is generally speedier and cheaper than paper communications.




The Insolvency Rules 2016 provide the procedural framework for the Insolvency Act 1986 and set out the procedural rules to be followed in the conduct of insolvency proceedings. The existing framework provide the processes by which an insolvency officeholder who deals with the assets of a debtor so that money can be returned to creditors. However, as the business environment has evolved, the current framework is not without its flaws and thus should be kept up to date. Therefore, the new rules are aimed at filling the gaps between the current procedures and the practical needs of businesses.


For example, at a meeting of creditors, attendees vote on proposals and give their approval for certain actions such as agreeing a voluntary arrangement proposal or approving the officeholder’s remuneration. Proposals approved at these meetings are in the best interests of the creditors.  However, meetings are often poorly attended and thus it seems holding the meeting is an unnecessary formality.  The cost of holding a physical meeting is borne by creditors.  Therefore, the new rules provide the procedural framework and will result in a reduction in the number of physical meetings of creditors.




Efficiency of administration of insolvency proceedings can be improved by modernising the insolvency framework and adopting a more cost-effective approach.  By reducing unnecessary regulatory burdens will also drive down the cost of administering insolvencies.  Hence, the implementation of the new rules reflects the way the business world operated and will result in improved returns to creditors.


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