The Insolvency (Amendment) Rules 2010 were published by HMSO on 11 March 2010, having been laid before Parliament on 10 March 2010. They come into force on 6 April 2010.

We first reported the New Insolvency Rules (then known as the draft Insolvency (Amendment) (No. 3) Rules 2009) in November 2009 prior to final revision by the Insolvency Rules Committee and to final government approval.

Key points (extracted from the official Explanatory Memorandum) are:

• communications passing between insolvency office-holders and those involved in the insolvency process may be by electronic means, provided there is consent between the sender and the recipient that communication may be effected in that way;
• new authentication provisions are provided, to replace the existing requirement that all insolvency documents must be physically signed;
• meetings that are required to be held within insolvency processes may be held other than at a physical venue;
• insolvency office-holders are being provided with the option of publishing documents and reports on a website as an alternative to sending such information to creditors by post or e-mail;
• the requirement for insolvency documents to be sworn before a solicitor or commissioner for oaths is being replaced with a requirement that such documents be instead verified by less burdensome statements of truth and witness statements in accordance with the Civil Procedure Rules;
• significant amendments are being made to the bases of remuneration and the mechanism by which administrators, liquidators and trustees in bankruptcy have their remuneration and expenses approved or challenged within the insolvency process;
• an express legislative mechanism is being introduced to enable administrators and other insolvency practitioners to seek recovery of unpaid pre-appointment costs as an expense of the administration;
• new provisions concerning the content of notices of insolvency events that are advertised in the London Gazette and by other means are being introduced to require certain basic details to be provided in every notice;
• the current requirement for documents in many insolvency proceedings to be filed with the court will be reduced;
• provision is being made to provide greater protection to individual debtors by making it explicit that the court may consider limiting disclosure of their address or whereabouts in circumstances where it is satisfied that such disclosure might reasonably be expected to lead to violence against the debtor or a member of their family; and
• amendments are being made to the 1986 Rules to reflect the fact that the Registrar of Companies will use a power he has within section 1068 of the Companies Act 2006 to impose requirements as to the form, authentication and manner of delivery of documents required or authorised to be delivered to the Registrar.

The essence of the changes in the bases of remuneration is that, for new insolvency cases beginning on or after 6 April 2010, insolvency office holders will be able to be paid on any one or more of the three bases: time-costs, fixed fees and percentage of asset value.

The revised wording makes clear that it is the basis of the remuneration, rather than the quantum, that is fixed by the creditors' committee, the creditors or the court (except when the court is dealing with a claim that the remuneration or expenses of the administrator are excessive).

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Not only is rent an administration expense, but it is payable on the terms of the lease. Having the company occupy only part of the premises on a quarter day will in most cases trigger an administration expense liability for the whole of the next quarter's rent, payable immediately.

This results from the decision in Goldacre (Offices) Ltd v Nortel Networks UK Ltd [2009] EWHC 3389 (Ch) (07 December 2009), where HHJ Purle QC applied the Lundy Granite or liquidation expense principle to administrations in light of the similarlity of wording between Insolvency Rules 4.218 and 2.67.

In February 2009 we postulated, following Innovate Logistics Ltd v Sunberry Properties Ltd [2008] EWCA Civ 1321 (18 November 2008), that the administrator and the landlord would have to consider the balancing exercise that the court would undertake between the financial loss to the landlord and the financial loss to the creditors generally. The pendulum has now swung firmly in favour of landlords.

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Modernisation and consolidation are the focus of The Insolvency (Amendment) (No. 3) Rules 2009, which are published in draft form by the Insolvency Service and are due to come into force on 6 April 2010.

Fortunately they are accompanied by a consolidated version of the Insolvency Rules 1986 showing tracked changes introduced by the "Modernisation Draft Rules". Also useful - and readable, at only 19 pages - is the Stakeholder Commentary.

There's a fair amount of detailed change for insolvency professionals to assimilate, but a few tasters from the Stakeholder Commentary are:

• The remuneration of office-holders may be set as a fixed amount instead of, or in addition to, a percentage of the value of property dealt with or a time charge. Remuneration may consist of a combination of any two, or all three, of these bases.
• Provision is made for an administrator or other qualified insolvency practitioner to be able to recover remuneration charged and expenses incurred before the formal start of the administration, of particular importance in what have become known as “pre-pack administrations”.
• One of the key facets of the modernisation reforms is to facilitate the delivery of documents electronically. With this in mind the amending Rules make a number of provisions facilitating the sending of documents by electronic means. The general principle found in Rules 12A.7 and 12A.10 is that documents may be delivered by electronic means provided that the recipient has consented and provides an electronic address.

The Insolvency Service notes:

• The Rules amendments have been prepared with the benefit of extensive stakeholder input and they are not issued now for further consultation, which would delay the delivery timetable. Instead, we are seeking comments concerning any errors or drafting difficulties that may be found within the draft Rules. Please note that the draft Rules being published here are currently under review with the Insolvency Rules Committee and therefore may be subject to some further revision.
• Any enquiries regarding the above should be directed towards Neil Ogilvie, Policy Unit, Area 5.7, 21 Bloomsbury Street, London WC1B 3QW; e-mail Neil.Ogilvie@insolvency.gsi.gov.uk

Chris Laughton is a Restructuring & Insolvency partner at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Chris you can call him on 020 7353 1597.

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We reported in September 2007 (here) the consultation paper issued by the Insolvency Service setting out its proposals to modernise and streamline the law governing insolvency procedures.

You may recall the disenfranchising proposal requiring creditors to “opt in” if they wish to receive information on or to participate in the insolvency process.

The Insolvency Service now reports (here) that the consultation was completed in December 2007. Responses are being reviewed and necessary changes to primary legislation will be taken forward in late 2008, with a view to implementation on 1 October 2009.

Another modernisation project relates to the Insolvency Rules. The Insolvency Rules Committee is expected to complete its work on the revisions in late 2008 and the changes are planned to come into force on 1 October 2009.

Companies House expects revisions to the insolvency forms to require procedural changes, which will also be implemented by October 2009.

Further consultation is planned in relation to the Insolvent Partnerships Order and the Administration of Insolvent Estates of Deceased Persons Order and those and other insolvency related statutory instruments are also to be revised ready for implementation by 1 October 2009.

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