Have you found yourself reading articles about the effects of the end of the Brexit transition period that leave you wondering: ok, but is there anything that directly affects my bog-standard UK insolvency work?
As we have been labouring on fixing our own document packs, I thought I’d publish our to-do list.
Jo’s latest Technical Update summarised the main changes and gave a full list of useful resources. If you have bought the latest Butterworths, you’ll see that the changes have already been helpfully inserted in italics. However, you still really need to refer to the Insolvency (Amendment) (EU Exit) Regulations 2019 (at https://www.legislation.gov.uk/uksi/2019/146/contents) to see which Act sections and Rules have been affected. And then of course there’s non-insolvency legislation like the GDPR to think about.
Jo and I found that the key effects boil down to:
- Determining the type of proceedings;
- Ignoring member State liquidators; and
- Re-defining the GDPR
New Types of Proceedings
It seems like only yesterday that we started to add to docs whether the EU Regulation (or EC Reg as it was then in 2010) applied and thus whether the proceedings in question were main, secondary, territorial or non-EU proceedings.
Unfortunately, the Brexit effect is not that this sentence can now be eliminated. Instead, we need to replace it with a statement as to whether the proceedings are (or will be):
“COMI proceedings, establishment proceedings or proceedings to which the EU Regulation as it has effect in the law of the United Kingdom does not apply”.
What defines the proceedings?
New definitions have been added to Rule 1.2:
“COMI proceedings” means insolvency proceedings in England and Wales to which the EU Regulation applies where the centre of the debtor’s main interests is in the United Kingdom;
“establishment” has the same meaning as in Article 2(10) of the EU Regulation;
“establishment proceedings” means insolvency proceedings in England and Wales to which the EU Regulation applies where the debtor has an establishment in the United Kingdom
Dear IP no. 116 explains that effectively COMI proceedings are the new “main” proceedings: the COMI tests are very similar to the previous ones and so, where a company’s principal place of business and registered office are in the UK, this will be the reason why the proceedings are COMI proceedings.
Dear IP no. 116 also explains that similarly establishment proceedings occur where the COMI is elsewhere but the insolvent has an establishment in the UK, where previously this would have resulted in secondary or territorial proceedings.
“Proceedings to which the EU Regulation as it has effect in the law in the United Kingdom does not apply” will be encountered where, per Dear IP no. 116, “one of the UK’s other grounds for the opening of insolvency proceedings has been relied upon”.
What documents are affected?
The documents affected (excluding those that an IP’s solicitors would draft, such as Admin order applications and winding-up petitions) are:
As regards the last document listed above, in fact there has been no change to R8.24(2)(c), which requires the Nominee’s report on the consideration of the IVA Proposal to “state whether the proceedings are main, territorial or non-EU proceedings and the reasons for so stating”… but we assume that this was mistakenly omitted.
Member State Liquidators: blink and you’ll have missed them
In June 2017, the Act and Rules were amended to require office holders to engage with member State liquidators involved with the debtor. For example, office holders needed to send to the member State liquidator copies of all their notices to the court, Companies House or the OR and liquidators and administrators needed to seek the member State liquidator’s consent to the dissolution of the company prior to filing the final docs at Companies House.
All those obligations have now been removed.
Even if you have never dealt with a member State liquidator before and your checklists never even referred to them, there is one change that you need to make to documents as a consequence: R15.8(3)(j) requires decision procedure notices in CVAs and IVAs to state the effects of R15.31 about the calculation of voting rights. R15.31(7) and (9) have been changed to remove reference to the rights of a member State liquidator to vote, so likewise you will need to tweak your CVA and IVA R15.8 notices.
The GDPR: what is it called now?
The EU’s GDPR (i.e. EU 2016/679) forms part of the UK’s law as a consequence of the European Union (Withdrawal) Act 2018. The Data Protection, Privacy and Electronic Communications (Amendments etc) (EU Exit) Regulations 2019 define the product of this action as the “UK GDPR”. These Regulations also make the necessary amendments to the GDPR to reflect the fact that the UK is not a member State.
Does this mean that we now need to start referring to the “UK GDPR”? Personally, I don’t think so. “GDPR” was a colloquial term in any event, so I don’t think this has ceased to be relevant… unless you’re communicating with someone in the EU about the GDPR, of course. Certainly, I don’t think there is any need to go editing internal checklists and I don’t think there’s any pressing need to change documents that refer in passing to the GDPR… although you might like to take this opportunity to replace “GDPR” with something more generic like “data protection legislation” to future-proof it in case the EU GDPR and the UK GDPR diverge materially over time.
So no changes are required for the GDPR switch then?
Almost none. If you have any documents that accurately define the EU GDPR, then you should update this. For example, many letters of engagement make specific reference to the General Data Protection Regulation EU 2016/679 in setting out the parties’ obligations as data controllers (such as the style clause for engagement letters that was issued in 2018 by ICAS at https://www.icas.com/regulation/guidance-and-helpsheets/preparing-for-gdpr). If so, then it would be correct to update this to refer to the effect of the 2019 Regulations.
You should also check what your privacy notice says about transferring data outside the EU. Some notices are specific about when this would happen (if ever). Of course, now the data you process are already outside the EU and if you were to transfer any of it to any of your service providers (e.g. ERA providers or debt collectors) in the UK, it would be a transfer outside the EU. Other than making sure that your privacy notice describes this reality, it’s not a big deal, as you would still be transferring data in accordance with the data protection legislation, wouldn’t you..?
What about GDPR-compliant contracts?
To be honest, I’ve encountered a staggering diversity in the levels of concern about the creation of GDPR-compliant contracts with data processors. I suppose that’s not surprising when even some RPB reviewers have chosen not to explore GDPR compliance to any great degree.
But if you do ensure that the data processors that are engaged by you, your firm, or the insolvents over which you are appointed are wrapped into a GDPR-compliant contract, then you may want to revisit the wording of your standards, especially around the conditions for transferring data outside the EU.
Fortunately, as far as we can see, those are the only practical effects on day-to-day UK insolvency work. What with all the changes to documents and processes in consequence of the CIGA and HMRC secondary preferential creditor changes, I think we could all do with a break from largely unhelpful tinkering for a while.