When a franchisee becomes insolvent
InsightsWhere an insolvent corporate franchisee is about to close its business, franchisors may look for a potential solution to try to retain goodwill in the brand in that particular territory...
As of 6th April 2017 the Insolvency Rules (England and Wales) 2016 (‘the New Rules’) will be in force. These replace the Insolvency Rules 1986 (and their 28 amending instruments) and provide the framework for the Insolvency Act 1986. They encompass the relevant amendments made by the Deregulation Act 2015 & The Small Business, Enterprise and Employment Act 2015.
The purpose of the New Rules is to consolidate the existing insolvency rules and their numerous amendments, update and improve the structure of the rules and bring welcome modernisation to the rules and the procedures within them.
The New Rules should have the effect of reducing costs and thereby increase returns to creditors.
We have highlighted below some of the most significant changes incorporated in the New Rules.
Instead of the statutory forms there are now prescribed requirements for notices which are set out in Part 1 of the 2016 Rules.
For example if you are a franchisor for example serving a Statutory Demand on a debtor you should not be using the old form of Statutory Demand but instead should ensure that your forms meet the prescribed requirements of the New Rules.
Changes to reduce unnecessary correspondence and to modernise communications including the use of emails and website notices:
Significant changes to the requirements for creditor meetings:
Physical meetings of creditors cannot be called by officer holders unless at least 10% of creditors in value, 10% of the total number of creditors or 10 individual creditors require it.
There are exceptions to deemed consent in some circumstances such as approvals or IVA or CVAs, removal of an office-holder or approval of office-holder’s remuneration.
Other changes contained in the New Rules
There are some limited transitional provisions in Schedule 2 of the New Rules, which permit the use of the old statutory forms and provide for the old rules to apply, in relation to some meetings.
A link to the New Rules is: http://www.legislation.gov.uk/uksi/2016/1024/contents/made If you have any queries or would like to discuss any insolvency-related matters with us please contact the Dispute Resolution team.
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Slough, Berkshire, SL1 3SR