The 2016 Rules will repeal and replace the Insolvency Rules 1986 (SI 1986/1925) (1986 Rules) with the stated aims of consolidating the 1986 Rules, and updating the structure, language and style of drafting. The changes also allow for modernisation and give effect to policy changes from a series of initiatives, including the Red Tape Challenge, and amendments made by the Deregulation Act 2015 and the Small Business and Enterprise Act 2015.

The 2016 Rules span over 380 pages, with 11 schedules that run for a further 29 pages. Part 1 contains the scope, interpretation, time and rules about documents. Parts 2 to 12 comprise the dedicated rules for each of the different procedures. It is a shame that the numbered rules were not matched to the different numbered parts of the primary legislation, which, save for individual voluntary arrangements, is out of synchronisation.

Of the common parts, Part 14 on claims and distributions to creditors in administration, winding up and bankruptcy will be a key focus. Part 15 on decision making, which sets out details of the procedures for electronic voting, virtual meetings, physical meetings and deemed consent, will also be key to understanding the modern approach to the procedures. There are also some important changes within the 11 schedules; for example, Schedule 2 contains all the transitional and savings provisions. These explain that the 2016 Rules apply from 6 April 2017 except in certain limited cases; for example, where meetings have already been called under the 1986 Rules before 6 April 2017.

If wading through hundreds of pages of the 2016 Rules does not appeal, then the explanatory memorandum is a good starting point for a practitioner to get to grips with the new regime. Practitioners need to remember to look at the relevant parts for the different processes and also the common parts that apply to their area of practice. To assist with navigation, the 2016 Rules contain notes, giving users pointers as to other rules and pieces of primary legislation that they also need to consider. The IS has also usefully provided a table of designations which it made available with the 2016 Rules in October 2016 and also a table of derivations which it made available on 9 November 2016.

Also, for those who will miss the prescribed forms, they currently remain available to download from the IS website. Details of what is to be included in the documents required for the various procedures are also now embodied in the 2016 Rules themselves, which in part explains why the 2016 Rules are so long. Publishers and suppliers of legal forms and software services are already working on ready-made forms that comply with the 2016 Rules.

The key changes relate to the following areas:

Electronic communication. Insolvency practitioners may continue to use electronic means of communication, where this has been established between the insolvent party and its stakeholders before the insolvency (Rule 1.45). However, the transitional arrangement expressly states that Rule 1.45(4) does not apply where the relevant proceedings commenced before 6 April 2017.

Websites. There will be no requirement to apply to court for permission to put future documents on a designated website (Rule 1.50). To use this mechanism, the officeholder must deliver a notice which contains a statement that future documents will be made available for viewing and downloading on the website. Recipients of the notice can also request hard copies. Documents made available in this way are required to be retained and made available on the website for two months after the end of the proceedings or the release of the last officeholder.

Progress reports. There is a fixed reporting regime for each of the main processes: administration; creditors’ voluntary liquidation; compulsory liquidation; and bankruptcy (Part 18). For administrations wishing to convert to liquidation, the 2016 Rules also provide for the reintroduction of a final progress report together with the notice to Companies House under paragraph 83 of Schedule B1. Generally speaking, where the obligation to prepare a report arises before 6 April 2017, the 1986 Rules continue to apply.

Statement of affairs. In order to protect the privacy of employees, former employees and consumers who are creditors of insolvent businesses, separate schedules are to be supplied to the Registrar of Companies, which will not be available to view. These provisions do not have retrospective effect.

Removal of creditors meetings and final meetings. Arguably the most controversial of the changes relate to the removal of the default provision to have a meeting to seek creditors’ input on decisions. Instead, the 2016 Rules set out a process of deemed consent, where written proposals are sent to creditors and unless 10% or more in value of creditors object, they are deemed to be approved (section 246 ZF, Insolvency Act 1986 and Rule 15). If 10% of creditors object, the officeholder still does not have to call a physical meeting, but can use an alternative process such as electronic voting, correspondence or hold a virtual meeting. It will be for the officeholder to decide which alternative form the meetings will take, save in two specific cases:

Final meetings for creditors in creditors' voluntary liquidations, compulsory liquidation and bankruptcy will no longer be required, nor will they be a requirement for members’ voluntary liquidations. As mentioned above, for meetings already notified before 6 April 2017, the 1986 Rules continue to apply.

Opting out of correspondence. Save for notices regarding intended dividends, creditors will be able to opt out of receiving all correspondence and reports (Rule 1.38).

Claims under £1,000. Where creditors have claims that are less than £1,000 in value, officeholders can rely on the information within the insolvent debtor’s own records, without the need for creditors to provide separately any further information or submit a formal proof of debt before officeholders can make a distribution (Rule 14.3).

Official receiver appointments. The official receiver can be appointed as trustee on the making of a bankruptcy order (Part 10). This will replace the initial appointment as receiver and manager so that the official receiver immediately becomes the trustee on the making of the order.

Insolvency practitioner as interim receiver. The court will be able to appoint an insolvency practitioner as an interim receiver ahead of the hearing of a bankruptcy petition, in all cases, rather than under the limited circumstances in the 1986 Rules (Rule 10.49).

Practitioners will be relieved to hear that certain aspects will remain in keeping with the 1986 Rules. Some key provisions which, save for some modernisation of the language, grouping together and number changes, will remain largely the same, include set-off; provable debts (except for small claims less than £1,000); administration and liquidation expenses; and interest. However, some may see it as an opportunity missed and consider that the 2016 Rules ought to have been used to clarify those areas or at least reflect the current case law.

It is also worth bearing in mind that the 2016 Rules were updated in a pre-EU referendum era, and so do not seek to anticipate any changes which may be necessary following the UK’s exit from the EU. Moreover, the 2016 Rules refer to the existing EU Regulation on Insolvency Proceedings (1346/2000/EC), which itself is going to be replaced by the Recast Regulation on Insolvency Proceedings (2015/848/EU) for proceedings that are commenced after 26 June 2017 (www.practicallaw.com/1-616-6197). This means that references in the 2016 Rules to Annex B proceedings, for example, will need to be updated in due course.

From the practitioner’s perspective, although many participated in developing the 2016 Rules and some have been involved in a line-by-line scrutiny of them, it is really only now that the work can begin in earnest on educating teams about the changes, and updating standard documents and opinions. There is much to do before 6 April 2017 if all is to end well.