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COVID-19 UK: New Temporary Practice Direction on Insolvency Proceedings

  • Market Insight 8 April 2020 8 April 2020
  • UK & Europe

  • Coronavirus

COVID-19 UK: New Temporary Practice Direction on Insolvency Proceedings

 

Whilst no further action has, as yet, been taken to implement the foreshadowed changes to insolvency law in England and Wales (see our comments on the same), the Business and Property Courts of England and Wales ("BPC") have moved quickly to release a temporary Practice Direction on insolvency proceedings ("TIPD").

The TIPD came into force on 6 April 2020 and is designed to supplement the Insolvency Practice Direction dated 4 July 2018 ("IPD"). It will remain in force until 1 October 2020 unless amended or revoked. It has clarified a number of issues that have arisen following the COVID-19 pandemic and the virtual shut down of non-urgent court services. A link to the TIPD can be found here.

Highlights

1) Bankruptcy and winding up petitions

All bankruptcy and winding up petition hearings will continue to be heard by Insolvency and Companies Court Judges ("ICCJs") in the BPC. It is anticipated that all regional Business and Property Courts hearing centres will follow suit in due course (with further guidance notes to be issued by the supervising Judges for the other hearing centres shortly).

All petitions in the BPC will be heard remotely using video or teleconferencing facilities, including Skype for Business and BT MeetMe. The court will allocate time slots for groups of 2 or more petitions and the links to the designated time slots will be published on the daily cause list.

Where a person intends to appear on any petition hearing, they must deliver a notice of intention to appear pursuant to Rule 7.14 Insolvency Rules 2016 ("IR16"). They must provide an email address and telephone number in order to be invited to join the hearing.

Whilst not included in the TIPD the court has clarified to us that the Official Receiver's Deposit can be paid over the phone during the court closure by dialling 020 7947 6102. Amex payments cannot, however, be accepted.

2) Adjournment of pending applications

All other insolvency applications and claims that are currently listed for hearing in the BPC and the High Court prior to 21 April 2020 have been adjourned and will be relisted. If society remains in virtual lockdown, and the courts effectively closed, beyond this date, then we anticipate the date to be extended. Parties to proceedings should continue to monitor the situation.

If a party considers that a matter that has been adjourned is urgent, it is incumbent on them to apply to the court to have it relisted. An email should be sent to ICC Judges' clerks at Rolls.ICL.Hearings1@justice.gov.uk or the relevant High Court Judge's clerk setting out:

  • the nature of the application and why it is urgent;
  • estimated time for hearing and pre-reading and number of parties attending; and
  • confirmation that the hearing can proceed remotely.

If, having read the papers, an ICCJ considers the application to be urgent, then they will direct their clerk to propose a date to the parties for the hearing to be conducted remotely. If a party disagrees with the hearing proceeding remotely, they may make written submissions to the court as to why it should be adjourned. The court will then give directions.

Chief ICC Judge Briggs has produced a guidance note to be read alongside the TIPD ("London Guidance Note") which applies to work listed before an ICCJ. The London Guidance Note sets out a list of hearings which will be deemed urgent in the BPC, being:

  1. applications made pursuant to section 17 of the Company Directors' Disqualification Act 1986;
  2. applications made pursuant to section 216 (restriction on re-use of company names) of the Insolvency Act 1986;
  3. public interest winding-up petitions;
  4. applications to convene a meeting for members' scheme of arrangement;
  5. capital reduction claims; and 
  6. cross-border merger claims.

It is not clear whether the above list is exhaustive, and the court intends to continue to list non-urgent business where possible and based on availability. Non-urgent applications and claims that have been adjourned are intended to be listed within 6 weeks from 21 April 2020. Notwithstanding that, we would still expect the court to receive a number of applications from applicants who might well consider that their proceedings should qualify for an early hearing.

Mr Justice Snowden has produced a similar guidance note that is applicable to the North and North Eastern Circuits ("North Guidance Note"). The North Guidance Note appears to take a different approach to urgent hearings and notes that the following hearings, together with those which "of their nature are urgent", will be presumed to be urgent, unless the court thinks otherwise:

  1. applications for relief from the consequences of sections 127 (avoidance of property dispositions) or 284 (restrictions on dispositions of property) of the Insolvency Act 1986;
  2. petitions to wind up a company in the public interest; 
  3. applications made pursuant to sections 17 of the Company Directors' Disqualification Act 1986; and 
  4. applications made pursuant to section 216 of the Insolvency Act 1986. 

In addition, the North Guidance Note had confirmed that 'Local Business' under the IPD that is listed before an open or staffed court shall be heard in accordance with the judge's directions. This may include hearing such applications remotely. Any new applications or claims which would otherwise have been issued in a suspended court should instead be issued in the nearest open or staffed court which has insolvency jurisdiction.

The North Guidance Note does not define, or provide further guidance, as to what types of hearing are "of their nature" urgent in the current economic climate. Any party seeking to relist their application on an urgent basis should therefore, as usual, demonstrate a genuine commercial reason for urgency, and provide evidence of likely prejudice suffered by virtue of any delay. We expect that the court will then consider the written submissions on a case by case basis to assess its urgency.

It will be interesting to see whether, in practice, the ICCJs and Circuit Judges take a more stringent approach to considering urgency than has previously been exercised, given the likely number of applications they may receive in relation to urgency. 

Conversely, if a party resists having a remote hearing and requests an adjournment on account of one or more of the party's representatives being unwell due to COVID-19, we expect the court will take a more liberal approach to its usual stance of requiring medical evidence, given the lack of available medical appointments. However, we expect that the court will unlikely adjourn hearings due to the participants claiming to have no access to telephone or videoconferencing facilities, or because of generalised concerns about safety issues caused by COVID-19. The TIPD and other statutory changes are a legislative and judicial response to precisely those concerns.

As per our previous article, a concerted effort continues to be made in the County Courts to hear urgent applications on a remote basis.  We anticipate further guidance being issued by the County Courts in a similar manner to Chief ICCJ Briggs and Snowden J in due course.

3) Procedure for swearing statutory declarations

The TIPD has clarified, in light of the social distancing measures imposed due to the COVID-19, that it is open to parties to swear statutory declarations relating to insolvency procedures otherwise than in person (as is the usual requirement). The most obvious of these procedures under the law of England and Wales is the process for appointing administrators, without the need for a court hearing.

A statutory declaration can now be sworn in the presence of a person authorised to administer the oath by video conference. The person authorised to administer the oath is required to attest that the statutory declaration was made in accordance with the TIPD, and the statutory declaration must also state that is was sworn in such manner.

In order to comply with the TIPD, we would recommend updating the statutory declaration wording in any applicable notice (including notices relating to the appointment of administrators) as follows:

And I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act 1835 and by video conference in accordance with paragraph 9 of the Temporary Practice Direction supporting the Insolvency Practice Direction (in force from 6 April 2020).

We would also recommend updating the oath administrator's signature box as follows:

A commissioner for Oaths or Notary Public or Justice of the Peace or solicitor or duly authorised officer by video conference in accordance with paragraph 9 of the Temporary Practice Direction supporting the Insolvency Practice Direction (in force from 6 April 2020).

Given the application of the EU Regulation No 910/2014 on electronic signatures, we consider that statutory declarations can be sworn in this manner by way of electronic signature, rather than being required to print off and physically sign the relevant documents during the videoconference. 

4) Filing notice of intention to appoint and notice of appointment of administrator

Whilst not related to COVID-19, the TIPD has clarified the position regarding out of hours filing of notices of intention to appoint administrators ("NOI") and notices of appointment of administrators ("NOA"). This amendment is a response to a number of recent cases where the court has been required to remedy administration appointments and confirm that appointments have been effective when the notices were issued via CE-filing.

An NOI filed via CE-filing pursuant to paragraph 27 of Schedule B1 to the Insolvency Act 1986 ("Sch. B1"), and an NOA filed via CE-filing pursuant to paragraphs 18 or 29 Sch. B1 will be deemed delivered to the court at the date and time recorded in the Filing Submission Email.

However, where an NOI is filed pursuant to paragraph 27 Sch. B1 outside normal court hours (10:00 to 16:00 on any day the court is open for business), it will be treated as delivered to the court at 10:00 on the day the court is next open for business. The moratorium pursuant to paragraph 28(2) Sch. B1 will also commence at that time. An NOA filed pursuant to paragraph 29 will also be treated as delivered to the court at 10:00 on the day the courts are next open for business.

An NOA filed pursuant to paragraph 14 Sch. B1 (i.e. a QFCH appointment) may not be filed by CE-filing outside normal court hours. Any such NOA must be done so by fax or email pursuant to Rules 3.20 to 3.22 IR16.

 

 

 

If you have any specific queries, please contact Andrew Foster or Duncan Lockhart.

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