The Insolvency (Scotland) Amendment Rules 2006 No. 734 (S. 6)

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STATUTORY INSTRUMENTS

2006 No. 734 (S. 6)
INSOLVENCY, SCOTLAND
COMPANIES
The Insolvency (Scotland) Amendment Rules 2006

	Made	13th March 2006
	Laid before Parliament	14th March 2006
	Coming into force	6th April 2006

The Secretary of State makes the following Rules in exercise of the powers conferred by section 411 of the Insolvency Act 1986[1]:

Citation, commencement and interpretation
     1. —(1) These Rules may be cited as the Insolvency (Scotland) Amendment Rules 2006 and shall come into force on 6th April 2006 ("the commencement date").

    (2) In these Rules "the 1986 Rules" means the Insolvency (Scotland) Rules 1986[2] and references to numbered Rules are to the Rules so numbered in the 1986 Rules.

Transitional provision
     2. —(1) The provisions of Rules 5 to 8 and 10 of these Rules shall not apply, and the provisions of the 1986 Rules shall continue to apply without the amendments made by those Rules, in any case where a company has entered administration before the commencement date.

    (2) The provisions of Rule 14 of these Rules apply in any case where a company entered into administration on or after 15th September 2003 other than a case where the company entered into administration by virtue of a petition presented before that date.

    (3) The provisions of Rule 15 of these Rules apply in any case where an insolvency practitioner is appointed on or after the commencement date.

Amendments to the Insolvency (Scotland) Rules 1986
     3. The 1986 Rules shall be amended in accordance with the following Rules.

Amendments to Forms
     4. —(1) For Forms 2.4B (Scot) to 2.10B (Scot) and 2.12B (Scot) set out in Schedule 5 to the 1986 Rules substitute Forms 2.4B (Scot) to 2.10B (Scot) and 2.12B (Scot) set out in Part 1 of the Schedule to these Rules.

    (2) For pages 2 and 13 of Form 2.13B(Scot) set out in Schedule 5 to the 1986 Rules substitute the pages set out in Part 2 of the Schedule to these Rules.

Amendment to Rule 2.2
     5. In Rules 2.2(3) for the words "main proceedings or territorial proceedings" substitute "main, secondary or territorial proceedings".

Amendment to Rule 2.25
     6. In Rules 2.25(1)(q)(ii) for the words "main proceedings or territorial proceedings" substitute "main, secondary or territorial proceedings".

Amendment to Rule 2.30
     7. In Rules 2.30(3) for the words "main proceedings or territorial proceedings" substitute "main, secondary or territorial proceedings".

Substitution of Rule 2.39
     8. —(1) For Rule 2.39 of the 1986 Rules substitute–

" Determination of outlays and remuneration

2.39.

—(1) Within 2 weeks after the end of an accounting period, the administrator shall in respect of that period submit to the creditors' committee or, if there is no creditors' committee, to a meeting of creditors–

(2) The administrator may, at any time before the end of an accounting period, submit to the creditors' committee or, if there is no creditors' committee, a meeting of creditors an interim claim in respect of that period for the outlays reasonably incurred by him and for his remuneration and the creditors' committee or meeting of creditors, as the case may be, may make an interim determination in relation to the amount of the outlays and remuneration payable to the administrator and, where they do so, they shall take into account that interim determination when making their determination under paragraph (3)(a)(ii).

(3) Within 6 weeks after the end of an accounting period–

(b) the administrator shall make the audited accounts, scheme of division and the said determination available for inspection by the members of the company and the creditors.

(4) The basis for fixing the amount of the remuneration payable to the administrator may be a commission calculated by reference to the value of the company's assets which have been realised by the administrator, but there shall in any event be taken into account–

    (5) If the administrator's remuneration and outlays have been fixed by determination of the creditors' committee in accordance with paragraph (3)(a)(ii) and he considers the amount to be insufficient, he may request that it be increased by resolution of the creditors.

    (6) If the creditors' committee fails to issue a determination in accordance with paragraph (3)(a)(ii), the administrator shall submit his claim to a meeting of creditors and they shall issue a determination in accordance with paragraph (3)(a)(ii).

    (7) If the meeting of creditors fails to issue a determination in accordance with paragraph (6) then the administrator shall submit his claim to the court and it shall issue a determination.

    (8) In a case where the administrator has made a statement under paragraph 52(1)(b), a resolution under paragraph (5) or Rule 2.39A(8) shall be taken to be passed if (and only if) passed with the approval of–

(9) In a case where the administrator has made a statement under paragraph 52(1)(b), if there is no creditor's committee, or the committee does not make the requisite determination in accordance with paragraphs (2) or (3)(a)(ii), the administrator's remuneration and outlays may be fixed (in accordance with this Rule) by the approval of–

    (10) In fixing the amount of the administrator's remuneration and outlays in respect of any accounting period, the creditors' committee or, as the case may be, a meeting of creditors may take into account any adjustment which the creditors' committee or meeting of creditors may wish to make in the amount of the remuneration and outlays fixed in respect of any earlier accounting period.

Appeal against fixing of remuneration
     2.39A. —(1) If the administrator considers that the remuneration fixed for him by the creditors' committee, or by resolution of the creditors is insufficient, he may apply to the court for an order increasing its amount or rate.

    (2) The administrator shall give at least 14 days' notice of his application to the members of the creditors' committee; and the committee may nominate one or more members to appear or be represented, and to be heard, on the application.

    (3) If there is no creditors' committee, the administrator's notice of his application shall be sent to such one or more of the company's creditors as the court may direct, which creditors may nominate one or more of their number to appear or be represented and be heard.

    (4) The court may, if it appears to be a proper case, order the expenses of the administrator's application, including the expenses of any member of the creditors' committee appearing or being represented on it, or any creditor so appearing or being represented, to be paid as an expense of the administration.

    (5) If the administrator's remuneration has been fixed by the creditors' committee or by the creditors, any creditor or creditors of the company representing in value at least 25 percent of the creditors may apply to the court not later than 8 weeks after the end of an accounting period for an order that the administrator's remuneration be reduced, on the grounds that it is, in all the circumstances, excessive.

    (6) If the court considers the application to be well-founded, it shall make an order fixing the remuneration at a reduced amount or rate.

    (7) The court may, if it appears to be a proper case, order the expenses of the creditor making the application to be paid as an expense of the administration.

    (8) Where there are joint administrators–

(a) it is for them to agree between themselves as to how the remuneration payable should be apportioned;

(b) if they cannot agree as to how the remuneration payable should be apportioned, any one of them may refer the issue for determination–

Amendment to Rule 2.41
9. —(1) In Rule 2.41 of the 1986 Rules–

(a) insert the following after paragraph (1)–

" (1A) Section 53 of the Bankruptcy Act, as applied by Rule 4.68, shall not apply for the purposes of this Rule.";

(b) at the start of paragraph (2) insert "Subject to paragraph (5) below,";

(c) in paragraph (3) for the words "Section 53(3)" substitute "Section 52(3)"; and

(d) insert the following after paragraph (4)–

" (5) Where the administration was immediately preceded by a winding up–

New Rule 2.41A
10. After Rule 2.41 of the 1986 Rules, insert the following–

" Payments of Dividends

2.41A.

—(1) On the final determination of the remuneration under Rules 2.39 and 2.39A, the administrator shall, subject to Rule 2.41, pay to the creditors their dividends in accordance with the scheme of division.

(2) Any dividend–

shall be deposited by the administrator in an appropriate bank or institution.

(3) If a creditor's claim is revalued, the administrator may–

(4) The administrator shall insert in the sederunt book the audited accounts, the scheme of division and the final determination in relation to the administrator's outlays and remuneration.

(5) For the purposes of paragraph 99(3), the former administrator's remuneration and expenses shall comprise all those items set out in Rule 4.67(1) as applied by Rule 2.41."

Amendment to Rule 2.57
     11. In Rule 2.57(1) of the 1986 Rules for the words "winding up" insert the words ", whether by entering voluntary winding up, being wound up by the court or wound up through the administration".

Amendment to Rule 2.58
     12. In Rule 2.58(1)(c) of the 1986 Rules for the words "or be wound up by the court" substitute ", be wound up by the court or be wound up through the administration".

Amendment to Rule 4.6
     13. In Rule 4.6–

(a) in paragraph (1), at the start insert "Except in relation to winding-up petitions under section 124A,",

(b) after paragraph (2), insert–

" (3) In winding-up petitions under section 124A, the appointment of the provisional liquidator may be terminated by the court on his application, or on that of the Secretary of State.".

Amendment to Rule 7.34
14. In Rule 7.34 of the 1986 Rules–

(a) in paragraph (2) after the words "other than winding up" insert the words "or administration";

(b) in paragraph (2) delete sub paragraph (i);

(c) insert the following after paragraph (3)–

" (4) In the case of administration proceedings, the administrator shall dispose of the books, papers and records of the company either in accordance with–

or, if by the date which is 12 months after dissolution of the company, no such directions have been given, he may do so after that date in such a way as he deems appropriate.

(5) An administrator or former administrator shall within 14 days of a request by the Secretary of State give the Secretary of State particulars of any money in his hands or under his control representing unclaimed or undistributed assets of the company or dividends or other sums due to any person as a member or former member of the company.".

New Rule 7.35
15. After Rule 7.34 of the 1986 Rules, insert the following–

" Information about time spent on a case – administration and company voluntary arrangements

7.35.

—(1) Subject as set out in this Rule, in respect of any administration or company voluntary arrangement in which he acts, an insolvency practitioner shall on request in writing made by any person mentioned in paragraph (2), supply free of charge to that person a statement of the kind described in paragraph (3).

(2) The persons referred to in paragraph (1) are–

(3) The statement referred to in paragraph (1) shall comprise in relation to the period beginning with the date of the insolvency practitioner's appointment and ending with the relevant date the following details–

    (4) In relation to paragraph (3) the "relevant date" means the date next before the date of the making of the request on which the insolvency practitioner has completed any period in office which is a multiple of six months or, where the insolvency practitioner has vacated office, the date that he vacated office.

    (5) Where an insolvency practitioner has vacated office, an obligation to provide information under this Rule shall only arise in relation to a request that is made within 2 years of the date he vacates office.

    (6) Any statement required to be provided to any person under this Rule shall be supplied within 28 days of the date of the receipt of the request by the insolvency practitioner.".

Gerry Sutcliffe
Parliamentary Under Secretary of State for Employment Relations and Consumer Affairs Department of Trade and Industry

13th March 2006

EXPLANATORY NOTE

(This note is not part of the Rules)

These Rules make changes to the Insolvency (Scotland) Rules 1986 (S.I. 1986/1915).

Rule 2.39 of the Insolvency (Scotland) Rules is replaced to clarify that in circumstances where an administrator had made a statement under paragraph 52(1)(b) of Schedule B1 to the Insolvency Act 1986, if it falls to the creditors to fix or increase the administrator's renumeration, those creditors comprise the secured creditors (with the inclusion of more than 50 per cent of the preferential creditors where a distribution is made etc. to preferential creditors); to state expressly that the expenses of the administration per Rule 4.67(1), as applied by Rule 2.41, are expenses of the former administration for the purposes of paragraph 99(3) of Schedule B1 to the Insolvency Act 1986; to provide for remuneration to be set by the creditors rather than the court in certain cases; and for the removal of the obligation to have legal expenses subject to taxation.

As a result of the changes made to the law on administration by the Enterprise Act 2002 (c.40) a company can move between liquidation and administration. This procedure enables creditors to make their claim as at the date of the liquidation. By way of clarification of the existing rules, the amendments provide that the relevant date is the date of the commencement of the winding up. Rules 11 and 12 make minor consequential clarification of Rules 2.57 and 2.58.

Rule 13 provides that in public interest winding-up petitions the provisional liquidator may only be removed by the court on the application of either the provisional liquidator or the Secretary of State.

Rule 7.34 is amended to make provision for when the Secretary of State can require information from an administrator and the circumstances in which an administrator can dispose of a company's records.

Rule 15 inserts a new Rule 7.35 into the Insolvency (Scotland) Rules 1986. This provides that an insolvency practitioner can be required to provide a statement of the number of hours spent on a case (other than a liquidation or receivership) by the insolvency practitioner and his staff by grade and further makes provision for the circumstances in which a statement should be made and the information to be included in that statement.

Minor amendments are made to the following Forms–

2.4B(Scot), 2.5B(Scot), 2.6B(Scot), 2.8B(Scot) and 2.9B(Scot) – Amendment to side-note in relation to EC Regulation proceedings to include reference to secondary proceedings.

2.7B(Scot) –

2.10B(Scot) – Revised to remove reference to the company's trade classification number.

2.12B(Scot) –

2.13B(Scot) – page 2 is substituted with a revised statement of affairs to reflect how the prescribed part should be applied to unsecured creditors and floating charge holders and page 13 is substituted to correct a typographical error.

Notes:

[1] 1986 c.45 as amended by the Enterprise Act 2002 (c.40). Section 411 was amended by the Insolvency Act 1986 (Amendment) Regulations 2002 (S.I. 2002/1037).back

[2] S.I. 1986/1915: amended by S.I. 1987/1921, 1999/1820, 2002/2709, 2003/2108, 2003/2109 and 2003/2111.back

[a] Amended by Correction Slip. Page 15; the heading to Form 2.7B(Scot) should read, "Notice of intention to appoint an administrator by company or director(s)". back

ISBN 0 11 070121 6

Prepared 21 March 2006

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	United Kingdom Statutory Instruments
You are here: BAILII >> Databases >> United Kingdom Statutory Instruments >> The Insolvency (Scotland) Amendment Rules 2006 No. 734 (S. 6) URL: http://www.bailii.org/uk/legis/num_reg/2006/20060734.html