Wednesday, 30 March 2011

Insolvency Service publication: Summary of responses to the consultation on the withdrawal of the optional fascility for liquidations to the bank with the Insolvency Services Account ("ISA")

The Insolvency Service (IS - pictured) have published a new document entitled: "Summary of responses to the consultation on the withdrawal of the optional fascility for liquidations to the bank with the Insolvency Services Account ("ISA")." (bottom right of the front page) The IS document provides a helpful summary of responses: 


Does the optional facility for voluntary liquidators to use the ISA need to be retained?
Would removal of the facility result in extra costs and if so what would these costs be?
Yes: In MVLs,  important to shareholders mainly due to the effective guarantee and security the ISA offers. Recommended by IP Regulator on prudence & safety grounds. Deposit rates offered.
No: except possibly lower interest rates outside ISA
Yes: The cheque writing facility from the ISA is extremely beneficial when paying large dividends
Yes: cheques would need to be manually written and signed by the liquidator which is likely to increase the costs of a liquidation.
No: Some benefit where a large number of dividend cheques to be issued and historically good rate of interest on deposits but this is no longer the case. ISA too complex and could be abolished altogether for cases handled by IPs.
No: Other than potential need to retain unclaimed dividend fee.
Yes: although current low rate of uptake of ISA due to low interest rates. Liquidator will take pragmatic view on grounds of relative costs of ISA against interest on local bank account.
Yes: ISA cost effective where large number of dividend cheques issued. Earlier closing of cases due to automatic operation of unclaimed dividends account.
Yes: Good for small IP practices who can keep all funds in one place and have a uniform approach to banking.
Not specified.
Yes: cost effective where dividend cheques issued. Earlier closing of cases due to automatic operation of unclaimed dividends account.
Yes: Mainly set-up costs where large number of commercial accounts would be needed and staff resources to deal with transition.
Yes: competitive interest rate, low cost of paying dividends to large numbers of shareholders, earlier closing of cases due to automatic operation of unclaimed dividends account. Mostly deals with MVLs.
Yes: particularly for dividends to overseas recipients.
No: but operate most CVLs and 40% of MVLs through ISA.
Yes: Higher costs of operating commercial accounts. Costs of issue and re-issue of cheques to large numbers of creditors. Set-up costs and loss of unclaimed dividend facility.
No but retain unclaimed dividends (which remains anyway)
None specified.


Picture Credit: http://blog.thecompanywarehouse.co.uk/wp-content/uploads/2010/05/insolvency-service.jpg

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