On 26 January 2022, the Covid recovery and Reform Bill (the "Bill") was introduced to the Scottish Parliament. The Bill followed a consultation exercise by the Scottish Government on the proposed changes to Scottish bankruptcy (known as sequestration). These proposed changes generated a good deal of interest with almost 3,000 responses being received from individuals and representative organisations.
This is the second article in 'Back to Basics', a series of articles looking at insolvency processes in Scotland. This article will examine the court process for sequestration, focusing on petitions by creditors.
The legal market in Scotland has changed over the last year, although perhaps not to the extent that anyone would have predicted. Firms have, in general terms, coped well with remote working and are beginning to cope well with hybrid working too. Traditional streams of work have been maintained and while some practice areas, such as insolvency and restructuring, have been quieter than anticipated, that has not had a significant impact on the bottom line. So, what can we expect in 2022?
1. Insolvencies will rise – even if we don’t experience the “tsunami”
In the context of debt recovery litigation, the obtaining of a decree (judgment) should not be an end in itself and this is particularly true in relation to volume debt recovery litigation. The purpose of a court decree is to enable the creditor obtain payment from his debtor of the sums of principal, interest and expenses (legal costs) due in terms of the decree.
Climate change is centre stage and our use of land and its effect on the climate are intertwined.
Land is a precious resource. "Buy land, they're not making make it anymore" - in these seven words, Mark Twain captures the mood of a nation. Land is a safe economic resource, until it is not. I am not sure if Mark Twain would have taken the same view with regard to contaminated land and to paraphrase Mr Orwell, "all [contaminated land] is born equal, but some [is] more equal than others".
The most recent UK and Scotland-specific statistics seem to show that the low comparative levels of corporate insolvency that we have seen as a result of the COVID-19 temporary measures may be coming to an end.
The Accountant in Bankruptcy (AiB), the Scottish equivalent of the Insolvency Service, reports that the number of Scottish companies becoming insolvent or entering receivership increased by over 80% in the second quarter of 2021-22, with 211 companies becoming insolvent compared with 117 in the same quarter of 2020-21.
The latest insolvency statistics have now been released by the Insolvency Service and the Accountant in Bankruptcy ("AiB").
The AiB is responsible for the devolved elements of corporate insolvency, which is limited to liquidation and receivership. The Insolvency Service on the other hand records details on matters for which responsibility is retained at Westminster, being administration and CVAs.
Any funder offering invoice finance facilities in the UK whose borrowers have (or may in the future have) debtors with a Scottish connection should be aware of the different rules applicable to invoice finance in Scotland.
Scots law is less user-friendly to invoice financiers than English law, and the following is a brief, high level guide to some of the key issues to consider in invoice finance transactions which involve Scottish debts or debtors.
When is Scots law relevant?
The Court of Appeal has overturned a decision of the High Court on whether immunity from suit, generally afforded to participants in court proceedings, extends to an examinee during an examination conducted under section 236 of the Insolvency Act 1986 ("Section 236").