These Regulations amend Part 14 of the Bankruptcy (Scotland) Act 2016 (“the 2016 Act”) on voluntary trust deeds for creditors, the Protected Trust Deeds (Forms) (Scotland) Regulations 2016 and the Bankruptcy Fees (Scotland) Regulations 2018.

Regulation 2 amends section 164 of the 2016 Act to add an additional condition for the protection of a trust deed. Where a trust deed is to be granted by a living debtor, that person must have been habitually resident, or had an established place of business, in Scotland at any time in the year preceding the granting of the trust deed. Where the debtor is any of the bodies or entities mentioned in section 164(1)(b) to (f), it must have had an established place of business in Scotland at any time in the year preceding the granting of the trust deed, or been formed or constituted under Scots law and at any time carried on business within Scotland.

Regulation 3 inserts new sections 171A, 171B and 171C into the 2016 Act. New section 171A provides that where there has been a material error or irregularity in the process that led to a trust deed gaining protected status, the Accountant in Bankruptcy (“AiB”) may decide to remove protected status. AiB’s decision can be reviewed under section 171B, and section 171C sets out the consequences of the removal of protection.

Regulation 4 adjusts the time periods in section 176 of the 2016 Act regarding the payment of dividends to creditors in a protected trust deed. The first dividend period is reduced from 24 months to 12 months, and subsequent dividend periods are 3 months, rather than 6 months. These changes will apply to trust deeds granted on or after these Regulations come into force on 1 July 2024.

Regulation 5 inserts a new section 184A into the 2016 Act, so that where the trustee in a protected trust deed considers that the debtor should not be discharged from the trust deed (for reasons of non-cooperation or failure to pay), the trustee must seek AiB’s agreement to refuse to discharge the debtor. Regulation 7(4) adds a relevant form to the Protected Trust Deeds (Forms) (Scotland) Regulations 2016.

Regulation 5 also inserts new sections 184B and 184C into the 2016 Act. The new sections introduce a process for early discharge where extenuating circumstances affecting the debtor mean that the debtor is no longer able to meet their obligations under the trust deed. The trustee is required to seek the agreement of the creditors to the proposed discharge. Unless the trustee receives written notification from a majority in number, or no fewer than one third in value, of the creditors that they object to the proposal, the debtor is discharged. If a majority in number or no fewer than one third in value of the creditors object in writing, the trustee must ask AiB to review the proposal. Where AiB reviews a proposal, it must determine whether it is satisfied that, taking account of all of the circumstances, it is fair and reasonable for the debtor to be discharged. AiB’s directions and determinations under new sections 184A, 184B and 184C are appealable to the sheriff.

Regulation 6 inserts new sections 186A and 186B into the 2016 Act. Section 186A allows AiB to take over as the trustee in a protected trust deed where the existing trustee is unable to continue to act and where no replacement trustee can be found. Section 186B provides that where AiB becomes the trustee under new section 186A, Part 14 of the 2016 Act will apply to AiB as it applies to any other trustee, subject to the modifications specified.

Regulation 8 amends the Bankruptcy Fees (Scotland) Regulations 2018. It provides that no fee is payable under those Regulations where AiB has become the trustee in a protected trust deed by virtue of new section 186A of the 2016 Act, and it uprates AiB’s annual supervision fee in respect of protected trust deeds from £100 to £120. This change will apply in respect of existing as well as new trust deeds.

A Business and Regulatory Impact Assessment has been prepared and placed in the Scottish Parliament Information Centre. Copies can be obtained from the Accountant in Bankruptcy, 1 Pennyburn Road, Kilwinning, KA13 6SA or www.aib.gov.uk.