Legal update: recent and anticipated statutory and regulatory changes

After the tumult of the past few years, with emergency legislation being introduced to mitigate the impact of the Covid-19 pandemic, the last few months have felt relatively quiet in terms of new legislation. That said, there have been a number of important government publications in relation to the insolvency industry, and it appears that change is on the horizon. 

First, the government published its response to the public consultation on the future of insolvency regulation on 4 August 2023. There will be a sigh of relief from the industry that the government has backed away from proposals to introduce a single regulator in the immediate future, out of recognition of the practical difficulties that would likely throw up. However, the stated intention is to legislate for a statutory power to create such a regulator “should that be needed in the future”.  Likewise, regulatory objectives will remain unchanged for the moment, though there is an indication that this will not be the case if a single regulatory is introduced in the future. In terms of what is changing: ethical and technical standards will now be set by the Secretary of State,; regulation will be extended to cover any firm offering insolvency services (to sit alongside the current regulation of insolvency practitioners); a public register of insolvency practitioners and firms offering insolvency services will be introduced (to sit alongside the current licensing regime); the requirements for security (i.e. insolvency bonds) is being tweaked in an effort to improve its overall robustness. 

Secondly, the Insolvency Service published its post-implementation review of the Corporate Insolvency and Governance Act 2020 on 21 February 2023. The review identifies that there were broadly positive responses from stakeholders to the permanent measures under the Act: restructuring plans under Part 26A of the Companies Act 2006, restrictions on the exercise of termination clauses, and the company moratorium have all seemingly been well received. It did, however, state that the uptake of restructuring plans and company moratoriums was lower than anticipated, for a variety of reasons. A number of potential areas are flagged up for future consultation and potential modification, including the costs associated with restructuring plans, and ambiguity around the proper priority of payments in the context of company moratoriums. The Insolvency Service also intends to publish guidance on a number of further matters.  Notwithstanding the time which has passed since the review was published, these matters appear to be pending. 

Thirdly, the government published the results of the public consultation on the personal insolvency framework on 4 August 2023. The consultation was wide-ranging and ambitious, considering the overall purpose of the legislatory regime and the way in which it balances the competing interests of different parties. Unsurprisingly, there was a wide divergence of opinion from respondents representing various different stakeholders, and there were few areas of consensus. One area where the responses did appear, broadly, to align was in relation to the desirability of avoiding stigma and encouraging debtors to take action at an earlier stage in order to benefit from the potential for a ‘fresh start’. Predictably, there was no consensus as to how best to achieve that.  Another emergent theme from the response is dissatisfaction with the piecemeal nature of the regime, and a desire for there to be a more holistic framework with a unified approach. The government’s response acknowledges that there are shortcomings in the current regime, and states an intention to formulate reform proposals for further public consultation. 

In terms of actual legislation, the Economic Crime and Corporate Transparency Bill continues to move through Parliament, having now progressed through all three readings in both Houses, with the Commons amendments currently being considered by the House of Lords. Perhaps the most notable provisions of the Bill in the context of insolvency are the proposed modifications to the role of the Registrar of Companies and requirements for filings at Companies House, which might well have an impact on the ability of office-holders to use company records in investigations. 

Finally, litigators ought to be aware that there are new standard case management directions for Part 7 claims in the Chancery Division of the Business and Property Courts in London.  Where there is a parallel Insolvency Act application (following the decision in Re Blackwater Plant Ltd) the Court is likely to continue to case manage these claims in a more nuanced way, but these standard directions may well form a starting point much of the time. 

Article by Ryan Hocking