The Insolvency Service (IS) has published a consultation paper on reforming debtor petition bankruptcy and early discharge from bankruptcy. The proposed reforms, which are aimed at speeding up the procedure and lowering costs, are to:

On 23 November a new form of diligence will be created which allows creditors to seize money belonging to a debtor in satisfaction of a debt.

In principle, all assets owned by a debtor should be susceptible to enforcement of a debt. But at present, creditors are unable to take diligence against cash owned by a debtor. To rectify this anomaly, a special category of diligence - money attachment - has been introduced by Part 8 of the Bankruptcy and Diligence etc. (Scotland) Act 2007.

When can a money attachment be used?

On 14 October 2009 the Government announced a major change to the way in which company buy-backs of debt will be taxed. The change may be relevant to any corporate debt buy-back where debt is being purchased at less than face value, including the exercise of a post-enforcement call option in a securitisation.

The global financial crisis has resulted in many loans trading at below par value. This presents borrowers with an opportunity to purchase their own debt and, therefore, extinguish the debt at a reduced cost.

Background

Article 4.1 of Council Regulation (EU) No 1346/2000 of 29 May 2000 on Insolvency Proceedings (the "Regulation") states: "Save as otherwise provided in this Regulation, the law applicable to insolvency proceedings and their effects shall be that of the Member State within the territory of which such proceedings are opened..."

Article 4.2 of the Regulation sets out a non-exhaustive list of the matters which the law of the state of the opening of insolvency proceedings is to determine, including:

Background

Article 4.1 of Council Regulation (EU) No 1346/2000 of 29 May 2000 on Insolvency Proceedings (the "Regulation") states: "Save as otherwise provided in this Regulation, the law applicable to insolvency proceedings and their effects shall be that of the Member State within the territory of which such proceedings are opened..."

Article 4.2 of the Regulation sets out a non-exhaustive list of the matters which the law of the state of the opening of insolvency proceedings is to determine, including:

Implementation of the Bankruptcy and Diligence etc (Scotland) Act 2007 continues apace. 22 April 2009 saw the most recent instalment with the passing of Commencement Order NO.4 including Parts 5 and 10 of the Act: namely the parts relating to inhibition, arrestments in execution and actions of furthcoming.

Part 5 - Inhibition

• Consultation ends September 7 2009
• Likely to re-ignite controversy over 'pre-pack' administrations

New proposals by the Government to improve access to rescue finance for small companies would allow larger or complex businesses to make private applications to the courts for an "administration-type" regime without creditors necessarily knowing. Proposals in the same consultation on lending to insolvent companies could drive up the cost of borrowing, says Reynolds Porter Chamberlain LLP (RPC), the City law firm.

The ready availability of credit over the first seven years of the past decade fuelled a massive, property-led consumer boom. Although perhaps a long time coming, the restriction in the continuing availability of such credit since mid 2007 has resulted in a serious recession. The scale of the problems will take time to unwind but given the continuing restrictions on credit, consumers are spending less, especially on high-value discretionary items.  

In Josef Syska (Administrator of Elektrim SA (in bankruptcy) and Elektrim SA (in bankruptcy) v Vivendi Universal SA & Others [2009] EWCA Civ 677 the main question to be decided by the Court of Appeal was whether, when an arbitration is proceeding in one Member State of the European Union, in this case the UK, and one of the parties to the arbitration becomes insolvent in another Member State, in this case Poland, the consequences of that insolvency, in so far as they affect the arbitration, are to be determined by the law of the Member State where the insolvency procee

The Bankruptcy and Diligence (Scotland) Act 2007contains a wide range of provisions affecting personal insolvency and various forms of diligence for enforcing civil obligations. Many of the provisions that relate to Inhibitions – which apply to heritable property - will come into force on 22 April 2009. Generally these reforms are to be welcomed.

An inhibition enables a creditor to prevent a debtor from transferring ownership of any of the debtor’s heritable property located in Scotland, or granting a security over it while the debt remains outstanding.