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Insolvency Act ready for April changes

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From April 6th, the most extensive amendments to insolvency law for over 25 years will come into force, bringing over 500 alterations in the process.

Technology will prove the biggest catalyst for change, as many insolvency procedures move online to encourage better communication and a “creditor friendly” experience. But alongside the technological advances, major changes to remuneration, reporting, costs and gender neutrality could leave those affected puzzled by the new landscape.

Emails will replace paper when conducting administrations, as creditor meetings and lengthy reports will move online to save costs and the environment. Insolvency practitioners will also be able to inform creditors of company administrations via email, replacing the postal method.

According to an Insolvency Service survey, more than 88% of insolvency practitioners agreed or strongly agreed that online offerings would provide better real-time information on each case, and a further 90% believed it would reduce the administration costs surrounding insolvency procedures.

But worries over security have plighted the online switch, with experts fearful that practitioners will abuse the system to avoid face to face meetings over sensitive financial matters.

There were also reservations over whether the new measures would integrate with existing software, as critics worry about the time needed for IT departments to secure firewall access.

Alongside the online advances, amendments now incorporate greater transparency and agreements on fees prior to an insolvency process. Creditors will be able to obtain further information surrounding the expenses of an office holder, the insolvency practitioner or official receiver, and the ability to challenge them within eight weeks of a creditor report being published.

Currently, creditors can challenge practitioners in court if they are unhappy about expenses and charges, but there has been no legislation in place that sets out creditors’ right to challenge.

The court’s role in administration of both corporate and personal insolvencies will also be diminished, with Companies House presence greatly increasing.

As well as businesses being able to register many documents at Companies House to reduce court burden, company insolvency procedures, which do not need a court sanction, can move to Companies House.

With many more amendments changing the face of the Insolvency Act, saving up to £42m in administration costs, businesses would do best to consult commercial lawyers to understand all separate nuances and ease the burden of insolvency.

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Written by Andrew Hodges

April 2, 2010 at 2:54 pm

Posted in Compliance, LinkedIn

Tagged with , ,

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