Scottish insolvency vs England and Wales - What you need to know

Laura Borland, Senior Solicitor at Brodies LLP explains how insolvency differs in Scotland compared to England and Wales.

Although the rules and procedures governing corporate and personal insolvency in Scotland and England and Wales are similar in many respects, with The Insolvency Act 1986 being the governing statute in both jurisdictions, there are some key differences.

With regard to corporate insolvency, different procedural rules apply in Scotland (The Insolvency (Scotland) Rules 1986). This means:

  1. there is no Official Receiver in Scotland. In England and Wales, the Official Receiver (a civil servant) will take insolvency appointments, both personal and corporate. Accordingly, private Insolvency Practitioners require consent to act in any corporate insolvency. This means there is no Liquidator of Last Resort in Scotland, and there is also no need to pay a percentage of realisations to an Official Receiver

  2. 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

  3. 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

  4. there is no statutory power to disclaim onerous property or contracts in a Scottish insolvency, equivalent to sections 178 or 179 of the Insolvency Act 1986. However, there are complex common law rules in relation to how Insolvency Practitioners should deal with onerous property and contracts

On the personal insolvency side, although the principles are broadly the same, there is separate legislation in Scotland which governs personal insolvency. Some key differences are:

  1. the technical word for bankruptcy is ‘Sequestration’

  2. the Accountant in Bankruptcy (AiB) is a public official who has a supervisory role in relation to personal insolvencies and can take appointment as Trustee. Independent Insolvency Practitioners can also take appointment as Trustee

  3. a debtor can apply to the AiB to self-sequestrate, but creditor applications still need to be made to a Court

  4. the minimum debt level for sequestration is £1,500 for a debtor application, and £3,000 for a creditor application, compared to £750 in England for all applications

  5. partnerships, trusts, body corporates and unincorporated bodies are subject to personal, rather than corporate insolvency legislation

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 under the Debt Arrangement Scheme, which is a government-run debt management tool.

More changes will be introduced by the Bankruptcy and Debt Advice (Scotland) Bill which has recently been passed. Some of the main changes included in the bill are as follows:

  1. mandatory advice and financial education from an approved Money Advisor for debtors

  2. a new procedure to deal with debtors who have minimal assets

  3. a common financial tool to be used by advisors to determine the balance of a debtor’s income over expenditure and calculate any contributions to be made from income

  4. contributions from a debtor’s income extended from a period of 36 months to 48 months

  5. no automatic discharge from sequestration. The debtor must satisfactorily cooperate with Trustee before discharge will be granted

  6. the AiB’s functions will be extended to remove certain administrative functions from the Court

  7. changes to appeal procedure

  8. tightening up of rules relating to recall of sequestration

In short, whilst the insolvency regimes north and south of the border are similar in many respects, there are important differences that insolvency practitioners need to know when it comes to people and companies facing financial difficulty.

About Brodies

Brodies LLP is the largest law firm in Scotland, delivering a full range of legal services of the highest quality to Scottish, UK and global organisations from offices in Edinburgh, Glasgow, Aberdeen and Brussels. You can find out more information about the firm at or follow on Twitter at @brodiesLLP.