Small Business, Enterprise and Employment Act 2015 (Consequential Amendments, Savings and Transitional Provisions) Regulations 2017 — House of Lords, 2018-01-22
Topic: Domestic Commerce
Michael Bates (Conservative, Centre-right): My Lords, the statutory instrument that I will discuss today follows the reforms introduced by the Government in 2015 to modernise and streamline the insolvency process. Those reforms were commenced in stages and these regulations cover the application of the 2015 reforms that came into effect in April 2017. The regulations will amend the financial sector insolvency regimes to take account of the April 2017 reforms For the benefit of noble Lords I will briefly set out where these regulations fit within the context of general insolvency law. As a starting point, insolvency law is based on the 1986 Insolvency Act which has been amended various times, including by the tranches of Government reforms instigated in 2015. This broader legal framework has been subsequently modified into specific insolvency regimes for different sectors, including for financial services. The insolvency regimes for financial services exist because general insolvency procedures are not always suitable for failed financial institutions. This is because general insolvency law does not necessarily reflect the complex nature of financial institutions and the impact that can arise from their failure I will now provide more detail on the 2015 reforms, explaining the genesis of the regulations before the House today. The 2015 reforms resulted in wide-ranging changes to the UK’s general insolvency regime, which broadly affected all sectors. These reforms were implemented in several stages: in May 2015, October 2015, April 2016 and the final tranche in April 2017 The April 2017 reforms did multiple things. First, they removed the default requirement to hold a physical meeting of creditors as the decision-making mechanism in an insolvency proceeding. Instead, a deemed consent procedure has been introduced which allows actions to be taken in an insolvency unless the creditors oppose the action. If 10% or more of creditors object to the proposal then the office holder will use an alternative decision-making process, such as a virtual meeting, correspondence or electronic voting. These changes remove unnecessary burdens and enable the greater use of technology to reduce the cost of administering insolvency proceedings. Secondly, they enable creditors to opt out of certain notices for both company and individual insolvency. This reform reduces the expense of sending notices for the office holder and similarly reduces for the creditor the expense of dealing with unnecessary and unwanted notices. The regulations before the House today apply the reforms of April 2017 to the specific financial services insolvency regimes where appropriate I will now set out further detail on who the regulations will affect. For companies, partnerships or individuals carrying on insurance or other financial activities, the regulations work to align those specific regimes with the April 2017 reforms. By aligning the insolvency proceedings for these kinds of financial firms with the April 2017 reforms, the amended regulations ensure that the benefits of the broader 2015 reforms to UK insolvency law extend to the financial sector However, in the case of modified insolvency regimes for financial institutions which are not companies, partnerships or individuals, and specialised regimes such as those for banks and building societies, the regulations do not apply. Instead, the regulations keep the legislation as it was prior to the April 2017 reforms coming into force. Due to the considerable volume of legislation affected by the 2015 reforms, this approach is necessary while the impact of the reforms on these types of institutions is further assessed and decisions are made about their implementation These consequential amendments are required to update and maintain consistency in legislation that governs the insolvency regimes for financial sector firms. The Government are committed to improving public and business confidence in the insolvency process. Having clear legislation that governs this process is fundamental in achieving this confidence. I beg to move.