Explanatory note

These Regulations amend the Insolvency Practitioners Regulations (Northern Ireland) 2006 (“the 2006 Regulations”).

Schedule 2 to the 2006 Regulations sets out requirements relating to the form of bond which an insolvency practitioner must keep in force whilst acting in respect of an insolvent. Claims may be made against such a bond in the event of losses caused or facilitated by the fraud or dishonesty of the insolvency practitioner.

Regulation 5(3)(b)(i) substitutes paragraph 3(2)(a) of Schedule 2 to the 2006 Regulations to require interest to be paid on losses caused or facilitated by the fraud or dishonesty of the insolvency practitioner. The rate of interest must be a rate above the Sterling Overnight Index Average (known as SONIA).

Regulation 5(3)(b)(ii) substitutes paragraph 3(2)(b) of Schedule 2 to the 2006 Regulations to:

increase the general penalty sum from £250,000 to £750,000;

extend the availability of the general penalty sum to cases where a specific penalty sum is not available.

Regulation 5(3)(d) inserts a new head (f) in paragraph 3(2) of Schedule 2 to the 2006 Regulations, which requires the bond to provide for payment of the following reasonable costs of the successor insolvency practitioner:

costs and expenses of investigating the fraud or dishonesty;

costs and expenses of making a claim under the bond;

costs and expenses of obtaining expert advice;

duplicate costs and expenses of administering the insolvent estate.

Regulation 5(3)(f) (which amends paragraph 3(3)(b) of Schedule 2 to the 2006 Regulations), together with the new paragraph 8ZA (which regulation 5(4) inserts into Schedule 2 to the 2006 Regulations), set a minimum run-off period of 2 years during which a claim may be made under the bond.

Regulation 5(3)(g) (which inserts a new head (c) into paragraph 3(3) of Schedule 2 to the 2006 Regulations), together with the new paragraph 8ZC (which regulation 5(4) inserts into Schedule 2 to the 2006 Regulations), make provision about minimum specific penalty sum indemnity periods. Where a bond limits the surety’s liability under the specific penalty sum (SPS) by reference to a maximum period during which any losses must have arisen, this period must not be shorter than 6 years from the date of the insolvency practitioner’s appointment in a case and must be extendable.

Regulation 5(4) (which inserts a new paragraph 8ZD into Schedule 2 to the 2006 Regulations) makes provision about notifications which the surety must give to the authorising body and the insolvency practitioner before a specific penalty sum expires (or otherwise ceases to have effect).

Regulation 6 sets out transitional and saving provisions for the changes made by these Regulations.

A regulatory impact assessment has not been produced for this instrument as no, or no significant, impact on the private, voluntary or public sector is foreseen. An explanatory memorandum has been published alongside this instrument at www.legislation.gov.uk