New Insolvency Practice Direction

As most insolvency professionals will know, a new Insolvency Practice Direction (IPD) came into force on 25 April 2018, replacing the 2014 version. Additionally, despite being introduced just over 2 months ago it has already been amended, and a revised version came into force on 4 July 2018 (the text of which can be accessed here).

The main reasons for the update to the IPD was to reflect the introduction of the Insolvency (England & Wales) Rules 2016, the re-branding of the Chancery Division as ‘the Business and Property Courts of England & Wales’ (BPC) and the re-naming of High Court Registrars as ‘Insolvency & Companies Court Judges’, as well as to generally bring the IPD in line with current practice and procedure.

Whilst the substance of much of the 2014 IPD remains, one significant change introduced by the new IPD concerns the distribution of court business, with the result being that most insolvency cases issued in a County Court will be transferred to a different court.

The current position is that ‘local business’ will remain in the County Court in which proceedings or applications are issued. For this purpose ‘local business’ is defined as:

1. Applications to set aside statutory demands;
2. Unopposed creditors’ winding-up petitions;
3. Unopposed bankruptcy petitions;
4. Applications for income payment orders;
5. Applications for and the conduct of public and private examinations;
6. Warrants for arrest in connection with the conduct of public or private examinations;
7. Claims for possession by an office-holder against a bankrupt (whether or not the bankrupt has been discharged);
8. Claims falling under the Trusts of Land and Appointment of Trustees Act 1996;
9. Claims for the granting or enforcement of charging orders pursuant to s.313 Insolvency Act 1986 (IA 1986);
10. Unopposed applications by the Official Receiver to suspend discharge from bankruptcy and, if opposed, any application by the Official Receiver for an interim suspension pending the matter being heard following its transfer; and
11. Applications for debt relief orders.

If a matter does not fall within the ‘local business’ definition, the application (but more likely the entire proceedings) will be transferred to:

1. A County Court in a BPC District Registry;
2. The County Court in Central London; or
3. One of the newly appointed ‘specialist centres’ (currently Brighton, Croydon, Medway, Preston and Romford).

Upon transfer a specialist judge in the receiving court will consider the case on paper (taking into account any written views of the parties) and make directions regarding the retention of the proceedings in that court. One option under the IPD is for part or all of the proceedings to be retained by the receiving court or even returned to the original court.

The ‘local business’ list does not contain certain types of the most common claims brought by insolvency office holders, including proprietary claims, applications challenging transactions at an undervalue or preferential payments, claims under s.423 IA 1986, and proceedings for repayment of directors’ loan accounts or unlawful dividends. It is therefore likely that if such claims are issued in the County Court these will be automatically transferred.

It remains to be seen how these changes will work in practice, but given a large number of matters, particularly relating to personal insolvency, are dealt with in the County Courts, these changes are likely to impact on the work undertaken by insolvency professionals.

If you would like to discuss the above in any more detail please feel free to contact Ali Zaidi or any member of our Restructuring & Insolvency Team.

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