Claims - changes to the system

29 March 2017

You receive a letter from an insolvency practitioner (IP), telling you that a customer of yours has gone into liquidation. Anyone who has been in business for any length of time has either encountered this scenario or knows someone who has.

The claim form you have to complete isn’t the most intuitive, and whilst you have some information you’d like to have investigated, you have to get on with the business of making some new sales to replace those you’ve just lost – so why bother?

The liquidation process in Scotland doesn’t lend itself to the way business is conducted in 2017. We still write letters and we still hold meetings. In that regard, very little has changed since the latest version of the legislation was drafted in 1986.

Our IP colleagues south of Hadrian’s Wall will shortly see one of the biggest shake-ups to insolvency legislation in recent times, which will mean that those claim forms do not have to be in a set style, allowing for a more user-friendly document; meetings will only be held if creditors want them, and even then, the meeting can be a virtual meeting, for example by Skype or conference call.

In Scotland, those responsible for drafting the legislation are working on the Scottish equivalents of these new rules, and whilst these are scheduled to be introduced later this year, perhaps 2018 is more likely. They won’t be exactly the same as the new English rules due to inherent differences between Scots Law and English Law, but those in the know suggest that there will be more similarities than differences.

Whenever they come into force, what won’t be changing is the liquidator’s duty to investigate what happened in the business in the period leading up to the liquidation, and here is where creditors can hold vital information that otherwise would never come to light.

A liquidator’s power to, say, bring previously disposed-of assets back under their control and sell them for the benefit of creditors, or hold a director financially accountable for continuing to trade when they should not have, is not something that should be discounted.

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