Oct 2015
Author: Nigel Cook
There is a hotchpotch of provisions in these Acts containing amendments to the Insolvency Act 1986 and the Rules.
Some provisions have already into effect (as anticipated in our previous IP Alerter) and others have been brought in during October 2015.
The main changes of interest to insolvency practitioners are: -
1. ADMINISTRATIONS
1.1 The administrators’ period of office can now be extended by consent for 12 months, increased from 6 months.
1.2 Administrators will now have power to assign the company’s statutory causes of action e.g. for wrongful trading or preferences. The proceeds received from such causes of action will now be ring-fenced and available only to unsecured creditors and not to qualifying floating charge holders.
1.3 The administrators will now have the power to bring claims against directors in respect of fraudulent trading and wrongful trading, previously only available to liquidators.
1.4 Where directors file a notice of intention to appoint to administrators any winding up petition presented after the time of filing will not prevent the appointment of the administrators.
1.5 Administrators’ powers to sell or dispose of company’s assets whether by private contract or auction can now be made subject to conditions or restrictions where the sale or disposition is to a “connected person”. Generally a connected person will be the company’s director or shadow director or a non-employee associate of such persons. These conditions or restrictions will be introduced by subordinate legislation and it is anticipated that they will be used to limit the scope of pre-pack sales.
1.6 Removal of the requirement to give notice of an intended appointment of administrator in out of Court administrations to the company or prescribed persons where there is no qualifying floating charge holder.
2. LIQUIDATIONS
2.1 The requirement for liquidators to obtain sanction from the creditors or Court before exercising powers under Schedule 1 of the Insolvency Act 1986 has been removed. This applies to both voluntary and compulsory liquidations. This provision was introduced in May 2015.
2.2 When introduced by delegated legislation there will no longer by a requirement to hold creditors’ meeting if the decision required can be made by another prescribed procedure. The alternative procedures are a “qualifying decision” procedure and “deemed consent”. Under the latter procedure the office holder may give notice to creditors specifying the matter for decision and stating that the decision will be approved unless 10% by value of creditors object within a specified time. It would always be possible for a meeting of creditors to be requisitioned by 10% of creditors by value or number. In addition creditors will be able to opt out of receiving notices except notices of proposed distribution or if the Court requires notice to be given.
3. DIRECTORS’ DISQUALIFICATION
3.1 The Secretary of State will now be able to require “any person” to provide information in the context of directors’ disqualification investigations or proceedings.
3.2 The Court will now be required to take into account a wider set of facts in determining unfitness including a directors’ responsibility for the failure of other companies and overseas companies and to take into account matters such as breach of statutory duties in relation to those companies.
3.3 Compensation orders can now be made against disqualified directors.
3.4 In relation to insolvencies commencing after 1st October 2015 the Secretary of State will now have three years to bring disqualification proceedings, increased from two years.
3.5 Office holders will be required to report to the Secretary of State on the conduct of all directors not just those whose conduct is considered blameworthy and this report will be required within three month of the insolvency date. These provisions have not yet been brought into force.
For further information on any of these changes please contact Nigel Cook on 01306 502294 or by email [email protected].
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