Insolvency Update: January 2014

Insolvency Update: January 2014

17th February 2014

The Business Minister has announced a number of proposals designed to reduce the cost of insolvency procedures.

Business Minister, Jenny Willott, has announced a number of measures designed to streamline and reduce the cost of insolvency procedures which could benefit creditors by £30 million a year as part of the Government’s response to the Red Tape Challenge which was launched in July 2013.

Willott said “When businesses do enter the stage of insolvency we need to make sure that the process is as smooth and straightforward as possible. One way of doing this is cutting the burdensome red tape which makes insolvency proceedings less complicated and troublesome”.


Under the new proposals insolvency practitioners will:

  • no longer be required to obtain court orders to carry out basic insolvency procedures such as extending administrations and posting information on websites;
  • be allowed to communicate with creditors electronically, instead of by letters;
  • have their record keeping requirements for internal purposes reduced;
  • be able to use electronic forms to report director misconduct;
  • be able to rely on the insolvent’s records when paying small claims rather than requiring creditors to complete claim forms;

It is expected that the reforms will be introduced by changes to existing legislation and as part of the changes to the Insolvency Rules that are due to be finalised by 2015/16.


High Court dismisses a debtor’s application to restrain a winding up petition

In Re a Company [2013] EWHC 4291 (Ch) (20 November 2013) the Court dismissed an application to restrain a winding up petition on the grounds that the debtor owed money to the creditor and had failed to establish a genuine and substantial cross-claim that exceeded the debt.

Courts will usually dismiss petitions where a debt is disputed in good faith and on substantial grounds and where the petitioner is not considered to be a creditor of the debtor.

If the debtor does not dispute the entire debt but asserts a cross-claim equal to or exceeding the petition debt, it is at the discretion of the court whether or not to dismiss the petition. The debtor will be required to prove that there is a real prospect of the cross-claim exceeding the amount of the undisputed debt if they are to be successful in persuading the court to dismiss the petition.


High Court confirms that a change of circumstances after a bankruptcy order has been made may be a ground for rescission, not annulment

In Yang v The Official Receiver and others [2013] EWHC 3577 (Ch) (01/10/13) the High Court held that where a liability order that was in existence at the time of the bankruptcy has been set aside on appeal then that is a change of circumstances giving rise to a ground for rescinding the bankruptcy order rather than annulling it on the ground that it ought not to have been made.