R3’s Press, Policy and Public Affairs update, April 2021
10 May 2021
The big news for the insolvency and restructuring profession in April was the countdown to the introduction of the new regulations on disposals to connected parties in administrations, which the Government hopes will improve stakeholder confidence in pre-packs.
The guidance for the new regulations was also published on 30 April, and R3 held a joint webinar with representatives from the Insolvency Service, ICAEW, the Pre-Pack Pool, and several prominent insolvency professionals a few days prior, to explore what the new operating environment for connected party sales could mean in practice, which was attended live by nearly a thousand viewers.
Throughout the consultation process, we have emphasised the importance of pre-pack administrations, including sales to connected parties, as a vital business and job rescue tool. The Government has listened to us on this, and has not opted to ban connected party pre-packs altogether, which was one of the options on the table.
While our reservations about the new regulations have been made clear, now is the time for the insolvency and restructuring profession to do what it does best - to make the best of the situation, and to work to preserve as much value for creditors as possible.
There was positive news for the profession, and for creditors, as the Law Commission released its report on its draft legislation to "modernise the rules on when consumers acquire ownership of goods under sales contracts". As our earlier blog post set out, the draft legislation would have made it very difficult for office holders to preserve value for creditors, and would have added significant costs to insolvency processes, to the ultimate detriment of consumers themselves.
We are pleased that the Law Commission has decided to pause the introduction of its proposed new rules, after finding that "[the] evidence and comments we have received do not suggest that the practice of delaying contract formation is causing significant consumer detriment at the moment", and that the "proposed rules may also result in a significant increase in the time spent and costs incurred by insolvency practitioners in determining ownership of goods in a retailer insolvency", one of the central points of our submission to the consultation.
Also in April, we responded to the Pensions Regulator's consultation on its draft policy on investigating and prosecuting new criminal offences under the Pension Schemes Act 2021. We are reassured on the profession's behalf that some prior concerns around the Act's potential impact on insolvency and restructuring activity have been cleared up, but further clarity on insolvency practitioner exemption from the scope of offences, and other issues, is still needed. Our full response to the consultation can be read here.
The Insolvency Service has announced a first review of the Insolvency (England and Wales) Rules 2016, and has issued a call for evidence to garner a range of views. Throughout last month, the Press, Policy, and Public Affairs team took part in sessions with several of our committees, to find out members' views on how the Rules are working in practice, and we look forward to submitting our response on behalf of the profession in due course.
R3 in the news
R3's comments on the monthly and quarterly (England and Wales/Scotland) corporate and individual insolvency statistics once more received widespread coverage in the media, from Reuters, the Press Association, The i, the Daily Mail, and BBC News, among others. The statistical commentary was also well-received in trade and regional outlets, including the Herald, the Belfast Telegraph, the Anglian Daily Times, and the Yorkshire Post.
We also arranged briefings for journalists from the Times and Sunday Times on the current state of financial strain among SMEs, and on the changes to pre-pack administrations.
R3 members can provide advice on a range of business and personal finance issues. To find an R3 member who can help you, click below.