Proposed Changes to the Individual Voluntary Arrangment (IVA) Regime Contained in the Insolvency Act 1986 and Associated Matters
ACCA is pleased to comment on the above consultation issued by The Insolvency Service.
PART 1. COMMENTS ON THE PROPOSAL TO AMEND THE INSOLVENCY ACT 1986 TO PROVIDE FOR A SIMPLIFIED VERSION OF THE IVA REGIME (SIVA).
a) Do the proposals put forward in this consultation exercise maintain necessary protections for those affected?
The various proposals will clearly reduce the level of protections available to creditors in SIVAs. The biggest single impact would appear to be with respect to the reduction of the approval threshold from 75% to simple majority. But these changes need to be set against the potential that the proposals offer for achieving savings in procedure costs, savings which stand ultimately to benefit creditors. It is also likely to be the case that, in the light of current developments, proposals will increasingly take express account of the demands of creditors. We think the specific proposals on this matter, especially the proposals to eliminate the routine filing of information with the court, are reasonable in terms of ensuring necessary protections for creditors. In the case of the simple majority for approval of the proposal, we assume that the current right of creditors under section 262 IA 86 to challenge the decision of a creditors' meeting will remain - we consider that this should remain as a necessary protection, especially as the right to propose modifications is to be abolished.
b) Do the proposals put forward in this consultation exercise prevent any person from continuing to exercise any right or freedom which he might reasonably expect to continue to exercise, as explained in paragraph 11 above?
Apart from the right to challenge decisions, referred to above, it might be argued that burden 5 as discussed in the document - the right of creditors to receive periodic reports from the supervisor - currently constitutes a valuable information 'right' which should be preserved. Clearly, creditors do have a direct interest in the conduct of any individual arrangement and they should remain entitled to be kept informed by the supervisor of material developments. But in our view, the information needs of creditors can be satisfied by the adoption of a 'report by exception basis', whereby reports are only prepared and distributed by the supervisor where the debtor is not complying with his obligations. Creditors should be able to be satisfied that the non-receipt of an annual report on this basis means that the arrangement is proceeding as per the agreed proposal. RPBs will also be in a position to monitor supervisors' compliance with the requirement to report by exception. For this system to work, though, there will need to be standardised procedures for defining the circumstances in which reporting by exception is to be required and the time frame within which such reports should be sent out.
e) Do you have any other comments?
The widespread backlog of cases in courts around the country is currently presenting real problems for practitioners. The proposals to abolish routine filing should help in this respect. But the document is not clear as to whether the intention is to abolish the requirement for the nominee to make an initial report to the court. This requirement, and the associated provision for the court to endorse the report and to give a filing date, is arguably the biggest single cause of delays.
Supplementary Question, Please answer yes, no or don't know
In principal do you support the introduction of Simple IVAS?
Yes.
PART 2. COMMENTS ON THE PROPOSAL TO AMEND VOLUNTARY ARRANGEMENTS SO AS TO REDUCE THE AMOUNT OF PAPERS FILED AT COURT.
a) Do the proposals put forward in this consultation exercise maintain necessary protections for those affected?
Yes, as long as creditors will still have a legal right to access particular documents held by the supervisor via applications made to the court under existing powers. In practice, IPs will invariably agree to make documents available on request without the need to go to court.
b) Do the proposals put forward in this consultation exercise prevent any person from continuing to exercise any right or freedom which he might reasonably expect to continue to exercise, as explained in paragraph 11 above?
No.
c) Do you have any views on the costs and savings as identified in chapter 11 of this consultation document and as addressed in the draft Regulatory Impact Assessment attached at Annex E?
Supplementary Question, Please answer yes, no or don't know
In principal do you support reducing the amount of papers filed at court?
Yes.
PART 3. COMMENTS ON PROPOSAL TO AMEND THE INSOLVENCY ACT 1986 TO PROVIDE FOR A REVISED REPORTING PROCEDURE
a) Do the proposals put forward in this consultation exercise maintain necessary protections for those affected?
If the necessary protection in this context is to ensure that creditors are kept aware of any material problems with the administration of the arrangement, then we would agree that the revised reporting procedure would meet this test.
b) Do the proposals put forward in this consultation exercise prevent any person from continuing to exercise any right or freedom which he might reasonably expect to continue to exercise, as explained in paragraph 11 above?
No.
e) Do you have any other comments?
We pose the question whether, as a result of reporting only by exception, there might follow an increase in the frequency with which creditors make direct, ad hoc approaches to supervisors for information relating to the progress of the administration. If this turned out to be the case, then the reductions in cost and IP time might not turn out to be as substantial as is being anticipated, especially in larger IVAs. There is likely to be a need for the new reporting arrangements to be advertised widely among creditors and prospective creditors. As stated previously, there will also be a need for a standardised approach to the circumstances in which exceptional reporting is warranted.
Supplementary Question, Please answer yes, no or don't know
In principal do you support what the proposal for a revised reporting procedure?
Yes.
PART 4. COMMENTS ON THE PROPOSAL TO AMEND SECTION 389A OF THE INSOLVENCY ACT 1986
a) Do the proposals put forward in this consultation exercise maintain necessary protections for those affected?
Allowing individuals to obtain authorisation to conduct IVAs (or CVAs) only would satisfy the basic requirement that the supervisor is competent to administer the procedure concerned. It is clearly important, though, that when advice is offered to a debtor by an IP, this is done in the light of other alternative avenues which may be appropriate for that debtor and in this connection, we think it is a positive development that the JIEB paper on personal insolvency incorporates, as from this year, coverage of extra-statutory procedures. Given this development, we do not consider that debtors who are advised by IVA-only licencees will necessarily be at a disadvantage in terms of the quality of the pre-procedure advice they receive vis-à-vis holders of full licences.
b) Do the proposals put forward in this consultation exercise prevent any person from continuing to exercise any right or freedom which he might reasonably expect to continue to exercise, as explained in paragraph 11 above?
No.
e) Do you have any other comments?
This proposal seems to have been inspired by the dramatic increase in the number of IVAs entered into over the last two years. It would on the face of it be a very useful option for firms which specialise in IVAs, as well as for firms of practising accountants. But a factor which has emerged more recently is the concerted response of the banking sector to the rise in IVAs, in particular its wish to impose its own demanding terms on how IVAs are approved and run. This hard line from lenders may have the effect in due course of dampening down the recent upsurge in IVA activity.
Supplementary Question, Please answer yes, no or don't know
In principal do you support what the amendment of section 389A?
Yes.
PART 5. COMMENTS ON THE PROPOSAL TO REPEAL THE DEEDS OF ARRANGEMENT ACT 1914
a) Do the proposals put forward in this consultation exercise maintain necessary protections for those affected?
Yes.
b) Do the proposals put forward in this consultation exercise prevent any person from continuing to exercise any right or freedom which he might reasonably expect to continue to exercise, as explained in paragraph 11 above?
No.
Supplementary Question, Please answer yes, no or don't know
In principal do you support repealing the Deeds of Arrangement Act 1914?
Yes.
PART 6. COMMENTS ON PROPOSALS TO RESTRUCTURE AND RESTATE PART VIII OF THE INSOLVENCY ACT 1986
a) Do the proposals put forward in this consultation exercise maintain necessary protections for those affected?
Yes.
b) Do the proposals put forward in this consultation exercise prevent any person from continuing to exercise any right or freedom which he might reasonably expect to continue to exercise, as explained in paragraph 11 above?
No.
Supplementary Question, Please answer yes, no or don't know
In principal do you support the proposal to restructure and restate Part VIII
of the Insolvency Act 1986?
Yes.
PART 7.
Do you think the supervisor in SIVA should be given the discretion to extend the 90-day period during which creditors are required to file their claims?
We believe that 90 days is more than sufficient for creditors to file their claims.