| Insolvency Act 2000 | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2000 Chapter 39 - continued | |||||||||||||||||||||||||||||||||||||||||||||||||
| back to previous text | |||||||||||||||||||||||||||||||||||||||||||||||||
|
62. Paragraph 24 Schedule A1: Monitoring of company's activities. This paragraph imposes a duty on the nominee to monitor the company's affairs during the moratorium in order to form an opinion as to whether or not the proposed voluntary arrangement (or that arrangement with any modifications of which he has been notified) has a reasonable prospect of being approved and implemented and the company is likely to have sufficient funds to enable it to continue its business through the moratorium. The term "business" refers to that business which the company proposes to carry on during the moratorium. The nominee may seek further information from the directors for the purpose of forming his opinion.
63. Paragraph 25 Schedule A1: Withdrawal of consent to act. This paragraph provides that a nominee must withdraw his consent to act if:
64. The paragraph provides that the moratorium comes to an end if the nominee withdraws his consent to act. The paragraph further provides that a nominee may not withdraw his consent to act in other circumstances. Where the nominee does withdraw his consent he must give notice of that to various parties and failure to do so without reasonable excuse is an offence.
65. Paragraph 26 Schedule A1: Challenge of nominee's actions, etc. The court on the application of any creditor, director or member of the company or any other person affected by the moratorium who is dissatisfied by any decision or act of the nominee, may confirm, reverse or modify that decision or act and give directions to the nominee or make any order it sees fit, either during or after the moratorium.
66. Paragraph 27 Schedule A1 sets out the course of action creditors may take if there are reasonable grounds for believing that the company has suffered a loss as a consequence of any act, omission or decision of the nominee, but the company does not propose to take any action. If the court concludes that the act of the nominee was not reasonable it may order the company to pursue any claim against the nominee or authorise a creditor to do so or make any other order it sees fit.
67. Paragraph 28 Schedule A1: Replacement of nominee by court. This paragraph provides that in certain circumstances (for example, if it is impracticable or inappropriate for the nominee to continue) the court may direct that the nominee be replaced by another person with the necessary qualification.
68. Paragraphs 29 and 30 Schedule A1: Summoning of meetings/conduct of meetings. These paragraphs provide for the summoning, conduct and reporting to the court of the outcome of such meetings of the creditors and the company as the nominee calls. He must call meetings of the creditors and of the company to be held within the period set out in paragraph 8(3).
69. Paragraph 31 Schedule A1: Approval of voluntary arrangement. This paragraph provides that the meetings summoned under paragraph 29 of Schedule A1 shall decide whether or not to approve the proposed voluntary arrangement (with or without modifications). But such modifications may not, without the concurrence of the creditors concerned, affect the right of a secured creditor to enforce his security or the rights of preferential creditors (as defined in Section 386 of the Insolvency Act 1986) to be paid in priority to other debts.
70. Paragraphs 32 to 34 Schedule A1: Extension of Moratorium. These paragraphs permit the initial period of the moratorium to be extended for a maximum period of up to two months provided certain conditions are satisfied.
71. The Secretary of State may make an order increasing or reducing the period by which the moratorium period may be extended.
72. Paragraph 35 Schedule A1: Moratorium Committee. Where a moratorium is extended this paragraph makes provision for a moratorium committee to be set up to exercise functions conferred on it by the meetings held under paragraph 29 of Schedule A1 where those meetings have approved an estimate of the expenses to be incurred in carrying out the committee's functions.
73. Paragraph 36 Schedule A1: Effectiveness of decisions. This paragraph determines when decisions under paragraphs 31, 32 or 35 of Schedule A1 are to take effect. It also provides that in the case of a conflict, the decision of the creditors' meeting is to prevail subject to the right of any member to apply to court for an order that the decision of the company meeting should prevail instead.
74. Paragraph 37 Schedule A1: Effect of approval of voluntary arrangement. This paragraph provides that a decision approving a company voluntary arrangement binds all creditors of the company owed money at the start of the moratorium including unknown creditors1. If unknown creditors come to light after the voluntary arrangement has been completed they can claim the amount they would have received from the company. If the voluntary arrangement ends prematurely then all creditors cease to be bound by the voluntary arrangement. It also, subject to certain restrictions, requires the court to dismiss any petition (other than an excepted petition) for the winding up of the company.
1. Unknown creditors means persons who were not served with notice of the meeting at which the company voluntary arrangement was approved but who would have been entitled to vote had they had notice of it.
75. Paragraph 38 Schedule A1: Challenge of decisions. This paragraph provides, by way of application to the court, for the decision approving a company voluntary arrangement to be challenged on the ground that it unfairly prejudices the interests of a specific person or that there has been some material irregularity in the conduct of a meeting held under paragraph 29 of Schedule A1. Unknown creditors who come to light after the voluntary arrangement has been completed can apply to the court on grounds of unfair prejudice. On such an application the court may, for example, revoke or suspend the decision approving the voluntary arrangement or direct that new meetings be summoned to consider any revised proposal.
76. Paragraph 39 Schedule A1: Implementation of voluntary arrangements. This paragraph provides for the implementation of an agreed company voluntary arrangement, and for the person who is carrying out the functions of the nominee to become the supervisor of the voluntary arrangement. It also enables people who are dissatisfied with any action of the supervisor to apply to the court and sets out what the court can do in such circumstances. It also enables the supervisor to apply to court for directions or petition for the winding up of the company or an administration order1 and enables the court to fill any vacancy in the office of supervisor.
1. See Part II of the Insolvency Act 1986
77. Paragraph 40 Schedule A1: Challenge of directors' actions. This paragraph provides that any creditor or member of the company can apply to the court if he considers that the company's affairs have been or are being managed in a way which is unfairly prejudicial to the interests of creditors or members or that an actual or proposed act or omission of the directors is or would be so prejudicial. The paragraph only applies in relation to acts or omissions of the directors during the moratorium. On such an application the court may, for example, make an order to regulate the management by the directors of the company's affairs or an order to bring the moratorium to an end. When making an order under this paragraph the court is required to have regard to the need to safeguard the interests of persons who have dealt with the company in good faith and for value. In the event that the company subsequently enters administration or liquidation (on a petition presented before the moratorium) any such application under this paragraph is to be made instead by the administrator or liquidator (as the case may be).
78. Paragraph 41 Schedule A1: Offences. This paragraph provides that any person who was an officer of the company who did certain acts in the 12 months prior to the start of the moratorium is to be treated as having committed an offence, e.g. if the officer has fraudulently removed company property worth £500 or more, or destroys or falsifies the company's records in relation to its property in that period. Any person who is an officer of the company during the moratorium who does the same things also commits an offence. The paragraph provides defences which may be raised in relation to the offences.
79. Paragraph 42 Schedule A1 This paragraph provides that it is an offence for an officer of the company to seek to obtain a moratorium, or an extension of it, by making a false representation or fraudulently doing, or failing to do, anything.
80. Paragraph 43 Schedule A1: Void provisions in floating charge documents. This paragraph provides that any provision in a floating charge is invalid if it provides for the obtaining of, or any action to obtain a moratorium, to be an event causing the charge to crystallise1 or restrictions to be imposed on the disposal of property or a ground for the appointment of a receiver.
1. A floating charge is a charge over the assets for the time being of a company referred to in the mortgage or other document creating the charge. It only affects those assets under specific circumstances set out in that document, when it crystallises, that is, becomes a fixed charge over the actual assets owned by the company at that time which fall into the class(es) covered by the charge.
81. Paragraph 44 Schedule A1: This paragraph gives the Financial Services Authority the right to participate in the moratorium procedure if the company is or has been regulated by the Authority.
82. The remaining paragraphs 5 to 12 of Schedule 1 make consequential amendments to various parts of the Insolvency Act 1986. For example the amendments to Section 233 will not permit suppliers of gas, water and electricity to require a nominee to pay outstanding debts for supply as a condition of supply during the moratorium. The amendment to Section 387 provides that the relevant date for determining preferential claims is the date on which the moratorium comes into force. A new Section 417A is added (order - making power to increase or reduce monetary sums specified in Schedule A1) to take account of the addition of the new company voluntary arrangement moratorium.
Schedule 2: Company voluntary arrangementsPart I - Amendments of the Insolvency Act 198683. This Schedule makes amendments to the provisions of the Insolvency Act 1986 relating to company voluntary arrangements where there is no moratorium. Paragraphs 84 to 90 summarise its principal provisions.
84. The nominee must state in his report to the court whether in his opinion the proposed company voluntary arrangement has a reasonable prospect of being approved and implemented. (Paragraph 3 of Schedule 2).
85. Amendments are made to the circumstances in which the court may replace a nominee. (Paragraph 3 of Schedule 2).
86. A decision by the creditors' meeting to approve a proposed voluntary arrangement is to prevail where this conflicts with the decision by the meeting of the company, subject to the right of a member to challenge this on an application to the court. Where such an application is made and the company is or has been regulated by the Financial Services Authority, the Authority is entitled to be heard on that application. (Paragraph 5 of Schedule 2).
87. The company voluntary arrangement will bind all of the company's creditors including unknown creditors who are entitled to claim from the company the amounts they would have received if they come to light after the voluntary arrangement has been completed. Such creditors may also make an application to the court on the ground that their interests are unfairly prejudiced by the voluntary arrangement that is approved. (Paragraphs 6 and 7 of Schedule 2).
88. It is an offence for an officer of a company to seek to obtain the approval of the members or creditors to a proposed voluntary arrangement by making a false representation or fraudulently doing, or failing to do, anything. (Paragraphs 8 and 12 of Schedule 2).
89. The nominee or supervisor is required to report suspected offences to the Secretary of State in England and Wales (and to the Lord Advocate in Scotland). The Secretary of State is granted certain powers to investigate such suspected offences. (Paragraph 10 of Schedule 2).
90. There are also consequential amendments resulting from Section 4 (Qualification or authorisation of insolvency practitioners) and other minor amendments of a clarificatory nature.
Part II: Amendments of the Building Societies Act 198691. This deals with the interaction of the company voluntary arrangement procedure with the Building Societies Act 1986. Principally it prevents a building society from using the company voluntary arrangement moratorium procedure.
Schedule 3: Individual voluntary arrangements92. This Schedule makes amendments to the provisions of the Insolvency Act 1986 relating to individual voluntary arrangements. Paragraphs 93-102 set out its principal provisions.
93. Except with the leave of the court, a landlord or any other person to whom rent is payable may not effect peaceable re-entry to premises let to a debtor, and distress may not be levied whilst an interim order is in force. (Paragraph 2 of Schedule 3). Similarly such persons may not effect peaceable re-entry (without leave) whilst an application for an interim order is pending and the court may forbid the levying of distress in that period. (Paragraph 4 of Schedule 3). An example of levying distress is where a landlord seizes goods for outstanding rent.
94. The nominee must state in his report to the court whether he considers that the proposed individual voluntary arrangement has a reasonable prospect of being approved and implemented. (Paragraph 6 of Schedule 3).
95. Amendments are made to the circumstances in which the court may replace a nominee. (Paragraph 6 of Schedule 3).
96. An individual may put a proposal for an individual voluntary arrangement to his creditors without first having to obtain an interim order as is currently the case. (Paragraphs 7 and 8 of Schedule 3).
97. The individual voluntary arrangement will bind all of the individual's creditors including unknown creditors who are entitled to claim from the individual the amounts they would have received if they come to light after the voluntary arrangement has been completed. They may also make an application to the court on the ground that their interests are unfairly prejudiced by the voluntary arrangement that is approved. (Paragraphs 10 and 11 of Schedule 3).
98. It is an offence for an individual to seek to obtain the approval of an individual voluntary arrangement by making a false representation or fraudulently doing, or failing to do, anything. (Paragraphs 12 and 16 of Schedule 3).
99. The nominee or supervisor is required to report suspected offences to the Secretary of State. (Paragraph 12 of Schedule 3).
100. The amendments to section 347 of the Insolvency Act 1986 provide that sections 252(2)(b) and 254(1) will apply to all forms of distress. (Paragraph 14 of Schedule 3).
101. The amendment to Section 387 provides the relevant date for determining claims where no interim order is obtained is the date on which the voluntary arrangement takes effect. (Paragraph 15 of Schedule 3).
102. There are also consequential amendments resulting from Section 4 (Qualification or authorisation of insolvency practitioners) and other minor amendments of a clarificatory nature.
Schedule 4 Part I: Minor and consequential amendments about disqualification of company directors etc.103. All of the provisions in this Part amend the Company Directors Disqualification Act 1986. Paragraphs 104 to 108 refer to particular amendments.
104. Provision is made as to the court in which an application for a disqualification order under Section 6 of that Act should be made. For example, where the company in question is being or has been wound up by the court, the application is made to that court. Proceedings are not invalidated by reasons of their being taken in the wrong court. (Paragraph 5 of Schedule 4).
105. Provision is made for Section 13 (criminal penalties for breach of disqualification order) and 15 (personal liability for company's debts where a person acts while disqualified) of the Company Directors Disqualification Act 1986 to apply in relation to Northern Irish disqualification orders. (Paragraphs 8 and 10 of Schedule 4).
106. Provision is made as to which court can give a disqualified person leave to act as a director or as a receiver (other than an administrative receiver) of the property of a company or to be concerned in the promotion, formation or management of a company. For example, where a person is subject to a disqualification order made by a court having jurisdiction to wind up companies, that person is required to make his application to that court. If a person is subject to a disqualification undertaking, the application for leave has to be made to a court to which the Secretary of State could have applied for a disqualification order had he not accepted the undertaking. Special provision is made for leave in a case where a person is subject to more than one disqualification order or undertaking. The amendments also require the Secretary of State to appear on the hearing of such an application. (Paragraph 12 of Schedule 4).
107. Regulations may be made for Northern Irish disqualification orders to be recorded in the register kept under Section 18 of the Company Directors Disqualification Act 1986. (Paragraph 13(5) of Schedule 4).
108. Rules made under Section 411 of the Insolvency Act 1986 (Insolvency Rules) or any order made under Section 414 (Fees Order), 420 (insolvent partnerships order) or 422 (order applying parts of Insolvency Act to banks) of that Act may include provisions relating to Sections 1A (as inserted by Section 6 of the Act), 13 and 14 of the Company Directors Disqualification Act 1986. The first of those sections relates to disqualification undertakings and the second and third (as they are going to be amended by the Schedule) to offences relating to the breach of disqualification undertakings or orders. (Paragraph 14 of Schedule 4).
Part II: Consequential amendments of other enactments109. Provisions in the Insolvency Act 1986, the Charities Act 1993, the Pensions Act 1995, the Police Act 1996 the Housing Act 1996 and the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990 make reference to disqualification orders under the Company Directors Disqualification Act 1986. The paragraphs in this Part of the Schedule make consequential amendments to those provisions so as to give disqualification undertakings and Northern Irish disqualification orders the same effect in the context of each of those Acts, as a disqualification order made under the Company Directors Disqualification Act 1986. The Police Act 1997 is similarly modified but only in respect of disqualification undertakings.
COMMENCEMENT110. A power is included in the Act to bring its provisions (with the exception of Section 14) into force by way of statutory instrument rather than bringing it into force on Royal Assent or on a date (or dates) specified in the Act. Section 14 which confers a power to make regulations comes into force when the Act is passed.
HANSARD REFERENCESThe following table sets out the dates and Hansard references for each stage of this Act's passage through Parliament.
| |||||||||||||||||||||||||||||||||||||||||||||||||
 | |
| Other Explanatory Notes | Home | Her Majesty's Stationery Office | |
| We welcome your comments on this site | © Crown copyright 2000 | Prepared: 6 December 2000 |