The new Scottish Rules are drafted very much to mirror, as far as possible, the Insolvency Rules for England and Wales. However, Scotland has a separate legal system and there are still some important differences in the statutory provisions and rules applicable north and south of the border. These include:
There is no Official Receiver in Scotland. In Scotland, private Insolvency Practitioners require to consent to act in any corporate insolvency. This means there is no liquidator of last resort in Scotland but consequently there is also no need to pay a percentage of realisations to an Official Receiver.
There is no Law of Property Act (LPA) Receivership in Scotland - the only type of receivership available in Scotland is Administrative Receivership under Chapter 2 of Part 3 of the Insolvency Act 1986.
There are different procedures for approving fees. In Scottish insolvencies, there is no ability to agree fees in advance with the creditors, rather there is a retrospective approval of accounts. Fees can be approved by creditors or by the court.
There is no statutory power to disclaim onerous property or contracts in Scottish insolvencies equivalent to sections 178 or 179 of the Insolvency Act 1986. An Insolvency Practitioner in Scotland can cause the insolvent company to decline to perform its contractual obligations. However, a liquidator has no power to divest the company of a real right in land by unilateral disclaimer.
With regard to alternatives to bankruptcy, there is no such thing as an Individual Voluntary Arrangement (IVA) in Scotland, however individuals can grant Trust Deeds which operate in a similar way. It's also possible to enter into a Debt Payment Plan (“DPP”) under the Debt Arrangement Scheme (“DAS”), which is a government-run debt management tool.
DAS, as it is known, has some key features of note:
It allows debtors to apply for a six week moratorium on diligence while they are considering a DAS.
It freezes all charges and interest on debts and allows individuals to reschedule payment of their debts over periods usually no longer than ten years.
Debtors can apply for variations in the terms of their DPP or payment breaks.
It is possible, in certain circumstances, for composition of debts to occur.
In short, whilst the insolvency regimes north and south of the border are similar in many respects, there are significant and important differences that insolvency practitioners need to be aware of when it comes to dealing with people and companies facing financial difficulty in Scotland.
