Forecast for 2024: The shifting tide of restructuring and insolvency

We find ourselves in a year of transition, with (whisper it) the economy stabilising and an election tipped for the second half of 2024. Surely only a fool, in times such as these, would seek to anticipate what change could unfold in the legal landscape over the next 12 months. Challenge accepted! For 2024 we have dusted off our crystal ball and we set out below our (educated) guesses of what to expect for the year (or two) ahead…

Implementation of UNCITRAL model law on Enterprise Group Insolvency

In July 2022, the Insolvency Service announced a consultation on the proposed implementation of two model laws adopted by UNCITRAL relating to the recognition of insolvency-related judgments and the cross-border management of enterprise group companies. In the response to the consultation (published in July 2023), the UK government confirmed its intention to proceed with implementation of the latter model law “as soon as possible”. This new model law aims to address situations where multiple group entities enter insolvency, where their financial and business affairs are intertwined. It will also provide for recognition of group insolvencies where the procedures originate in two or more jurisdictions (or even when they are all in the same jurisdiction). As revolutionary as that sounds, we find ourselves six months on and no progress has been made. However, we have a feeling that 2024 could be the year for this new model law – watch this space.

Changes to the regulation of insolvency practitioners (IPs)

Following the government’s announcement of an overhaul of insolvency regulation to “modernise the framework, increase transparency and bolster confidence” in the industry, it has since shelved plans to introduce a new central government body to regulate IPs (similar to the Solicitors’ Regulation Authority for solicitors). However, there are still a few key reforms slated for implementation:

• Legislation is to be introduced to designate the power to create an independent single regulator (if required in the future)
• The Secretary of State is to be given overall responsibility to set ethical and technical standards for the insolvency profession
• The creation of a single public register of authorised IPs and firms offering insolvency services
• A new regulatory framework to require all firms offering insolvency services to be authorised and registered with regulatory bodies and for firms to appoint a senior compliance officer
• Reforms to the IP bond scheme to cover losses in the event of fraud or dishonesty, including increasing some cover levels to better protect creditors

Changes to the Insolvency Rules 2016 (IR16)

Perhaps a little ambitious to achieve in an election year, but in 2022 the Insolvency Service identified a number of areas for reform of IR16 which are yet to be progressed. The two key changes anticipated are:

1. Reform of the creditors’ voluntary liquidation (CVL) regime, which has come increasingly under the spotlight in recent years due to the CVL’s sustained growth in popularity. This review of the CVL regime will consider whether the procedure remains fit for purpose and for amendments to certain issues such as the approval of pre-appointment costs and creditor notice periods.
    
2. Clarification of which types of court application should be made as insolvency applications under IR16 or under Part 7 of the Civil Procedure Rules 1996, to avoid wasted time and costs. This is an issue which has been before the courts in recent years and on which we have reported previously.

Insurer resolution regime

The government has announced plans to introduce a new resolution regime for insurers which will give the Bank of England new stabilisation powers and tools to enable it to manage the failure of key insurers. This resolution regime is similar to the existing UK bank special resolution regime, but will be tailored to the insurance sector and is designed to take account of the capital structure and risk profile of insurance companies. New legislation will need to be tabled to introduce the regime and it is anticipated that there will be an extended implementation period. Will it happen in 2024? Your guess is as good as ours..!