Special insolvency regimes: do recent reforms apply?
Insolvency Bitesize - April 2018
New regulations clarify whether recent insolvency law changes apply to the UK’s financial sector special insolvency regimes.
The UK has over 30 special or modified insolvency regimes each with variations in the application of the standard corporate insolvency legislative framework.
In April 2017, the new Insolvency Rules came into force replacing the 1986 rules. At the same time, other insolvency law changes made by the Small Business, Enterprise and Employment Act 2015 to the Insolvency Act also came into force. Those largely replaced physical creditors’ meetings with new decision-making processes and enabled creditors to opt out from receiving insolvency notices.
The amended Insolvency Act and the new Insolvency Rules apply to some special insolvency regimes, but in other cases, the Act without the recent amendments and the 1986 rules are preserved. Others still have their own separate procedural rules, sometimes in addition to the 1986 or 2016 rules.
Recently published savings regulations now look to clarify whether the recent reforms apply to those special insolvency regimes in the financial sector. Essentially, they mean that the recent changes:
- will not apply to, and the IR 1986 are preserved in respect of: building societies, friendly societies, co-operative societies, community benefit societies and the bank liquidation, bank administration and investment bank special administration regimes; but
- the changes will apply to insurance companies and the proposed financial market infrastructure administration regime (as well as individuals to which HM Treasury’s legislation applies company and individual insolvency law with modifications).
The new savings regulations follow those published in 2017 which preserved the 1986 rules for a range of non-financial sector special insolvency regimes (such as in the energy, water or railway sectors).
The Government has made clear that it intends to undertake work to consider the application of the April 2017 changes to those financial sector regimes where they do not currently apply in due course. Clearly, for any new special insolvency regimes that are enacted, it is highly likely that the recent legislative reforms and new Insolvency Rules would apply.