Voluntary arrangements

1 Moratorium where directors propose voluntary arrangement

Schedule 1 (which—

(a) enables the directors of a company to obtain an initial moratorium for the company where they propose a voluntary arrangement under Part I of the [1986 c. 45.] Insolvency Act 1986,

(b) makes provision about the approval and implementation of such a voluntary arrangement where a moratorium is obtained, and

(c) makes consequential amendments),

is to have effect.

2 Company voluntary arrangements

Schedule 2 (which—

(a) amends the provisions about company voluntary arrangements under Part I of the [1986 c. 45.] Insolvency Act 1986, and

(b) in consequence of Schedule 1 and those amendments, makes amendments of the [1986 c. 53.] Building Societies Act 1986),

is to have effect.

3 Individual voluntary arrangements

Schedule 3 (which enables the procedure for the approval of individual voluntary arrangements under Part VIII of the [1986 c. 45.] Insolvency Act 1986 to be started without an initial moratorium for the insolvent debtor and makes other amendments of the provisions about individual voluntary arrangements) is to have effect.

4 Qualification or authorisation of nominees and supervisors

(1) Part XIII of the [1986 c. 45.] Insolvency Act 1986 (insolvency practitioners and their qualification) is amended as follows.

(2) In section 388 (meaning of “act as insolvency practitioner”)—

(a) for subsection (1)(b) there is substituted—

“(b) where a voluntary arrangement in relation to the company is proposed or approved under Part I, as nominee or supervisor”,

(b) for subsection (2)(c) there is substituted—

“(c) where a voluntary arrangement in relation to the individual is proposed or approved under Part VIII, as nominee or supervisor”, and

(c) after subsection (2A) there is inserted—

“(2B) In relation to a voluntary arrangement proposed under Part I or VIII, a person acts as nominee if he performs any of the functions conferred on nominees under the Part in question.”

(3) In section 389 (acting without qualification an offence), after subsection (1) there is inserted—

“(1A) This section is subject to section 389A.”

(4) After that section there is inserted—

“389A Authorisation of nominees and supervisors

(1) Section 389 does not apply to a person acting, in relation to a voluntary arrangement proposed or approved under Part I or Part VIII, as nominee or supervisor if he is authorised so to act.

(2) For the purposes of subsection (1) and those Parts, an individual to whom subsection (3) does not apply is authorised to act as nominee or supervisor in relation to such an arrangement if—

(a) he is a member of a body recognised for the purpose by the Secretary of State, and

(b) there is in force security (in Scotland, caution) for the proper performance of his functions and that security or caution meets the prescribed requirements with respect to his so acting in relation to the arrangement.

(3) This subsection applies to a person if—

(a) he has been adjudged bankrupt or sequestration of his estate has been awarded and (in either case) he has not been discharged,

(b) he is subject to a disqualification order made or a disqualification undertaking accepted under the [1986 c. 46.] Company Directors Disqualification Act 1986 or to a disqualification order made under Part II of the [S.I. 1989/2404 (N.I. 18).] Companies (Northern Ireland) Order 1989, or

(c) he is a patient within the meaning of Part VII of the [1983 c. 20.] Mental Health Act 1983 or section 125(1) of the [1984 c. 36.] Mental Health (Scotland) Act 1984.

(4) The Secretary of State may by order declare a body which appears to him to fall within subsection (5) to be a recognised body for the purposes of subsection (2)(a).

(5) A body may be recognised if it maintains and enforces rules for securing that its members—

(a) are fit and proper persons to act as nominees or supervisors, and

(b) meet acceptable requirements as to education and practical training and experience.

(6) For the purposes of this section, a person is a member of a body only if he is subject to its rules when acting as nominee or supervisor (whether or not he is in fact a member of the body).

(7) An order made under subsection (4) in relation to a body may be revoked by a further order if it appears to the Secretary of State that the body no longer falls within subsection (5).

(8) An order of the Secretary of State under this section has effect from such date as is specified in the order; and any such order revoking a previous order may make provision for members of the body in question to continue to be treated as members of a recognised body for a specified period after the revocation takes effect.”

Disqualification of company directors etc.

5 Disqualification orders

(1) In section 1 of the [1986 c. 46.] Company Directors Disqualification Act 1986 (disqualification orders: general), in subsection (1), for the words following “an order that” there is substituted “for a period specified in the order—

(a) he shall not be a director of a company, act as receiver of a company’s property or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company unless (in each case) he has the leave of the court, and

(b) he shall not act as an insolvency practitioner.”

(2) At the end of subsection (2) of that section there is inserted “and, unless the court otherwise orders, the period of disqualification so imposed shall begin at the end of the period of 21 days beginning with the date of the order”.

(3) In section 22 of that Act (interpretation), at the end there is inserted—

“(10) Any reference to acting as receiver—

(a) includes acting as manager or as both receiver and manager, but

(b) does not include acting as administrative receiver;

and “receivership” is to be read accordingly.”

6 Disqualification undertakings

(1) The Company Directors Disqualification Act 1986 is amended in accordance with this section.

(2) After section 1 there is inserted—

“1A Disqualification undertakings: general

(1) In the circumstances specified in sections 7 and 8 the Secretary of State may accept a disqualification undertaking, that is to say an undertaking by any person that, for a period specified in the undertaking, the person—

(a) will not be a director of a company, act as receiver of a company’s property or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company unless (in each case) he has the leave of a court, and

(b) will not act as an insolvency practitioner.

(2) The maximum period which may be specified in a disqualification undertaking is 15 years; and the minimum period which may be specified in a disqualification undertaking under section 7 is two years.

(3) Where a disqualification undertaking by a person who is already subject to such an undertaking or to a disqualification order is accepted, the periods specified in those undertakings or (as the case may be) the undertaking and the order shall run concurrently.

(4) In determining whether to accept a disqualification undertaking by any person, the Secretary of State may take account of matters other than criminal convictions, notwithstanding that the person may be criminally liable in respect of those matters.”

(3) In section 7 (applications to court under section 6; reporting provisions), after subsection (2) there is inserted—

“(2A) If it appears to the Secretary of State that the conditions mentioned in section 6(1) are satisfied as respects any person who has offered to give him a disqualification undertaking, he may accept the undertaking if it appears to him that it is expedient in the public interest that he should do so (instead of applying, or proceeding with an application, for a disqualification order).”

(4) In section 8 (disqualification after investigation of company), after subsection (2) there is inserted—

“(2A) Where it appears to the Secretary of State from such report, information or documents that, in the case of a person who has offered to give him a disqualification undertaking—

(a) the conduct of the person in relation to a company of which the person is or has been a director or shadow director makes him unfit to be concerned in the management of a company, and

(b) it is expedient in the public interest that he should accept the undertaking (instead of applying, or proceeding with an application, for a disqualification order),

he may accept the undertaking.”

(5) After that section there is inserted—

“8A Variation etc. of disqualification undertaking

(1) The court may, on the application of a person who is subject to a disqualification undertaking—

(a) reduce the period for which the undertaking is to be in force, or

(b) provide for it to cease to be in force.

(2) On the hearing of an application under subsection (1), the Secretary of State shall appear and call the attention of the court to any matters which seem to him to be relevant, and may himself give evidence or call witnesses.

(3) In this section “the court” has the same meaning as in section 7(2) or (as the case may be) 8.”

(6) In section 9 (matters for determining unfitness of directors), after subsection (1) there is inserted—

“(1A) In determining whether he may accept a disqualification undertaking from any person the Secretary of State shall, as respects the person’s conduct as a director of any company concerned, have regard in particular—

(a) to the matters mentioned in Part I of Schedule 1 to this Act, and

(b) where the company has become insolvent, to the matters mentioned in Part II of that Schedule;

and references in that Schedule to the director and the company are to be read accordingly.”

7 Effect of Northern Irish disqualifications

(1) After section 12 of the [1986 c. 46.] Company Directors Disqualification Act 1986 there is inserted—

“12A Northern Irish disqualification orders

A person subject to a disqualification order under Part II of the [S.I. 1989/2404 (N.I. 18).] Companies (Northern Ireland) Order 1989—

(a) shall not be a director of a company, act as receiver of a company’s property or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company unless (in each case) he has the leave of the High Court of Northern Ireland, and

(b) shall not act as an insolvency practitioner.”

(2) If provision is made in relation to Northern Ireland for undertakings corresponding to the disqualification undertakings provided for by section 6, the Secretary of State may by order made by statutory instrument make any modifications of the [1986 c. 46.] Company Directors Disqualification Act 1986, or any enactment amended by Part II of Schedule 4, which he considers necessary or expedient to give effect to those undertakings in relation to Great Britain.

(3) A statutory instrument containing an order under this section is to be subject to annulment in pursuance of a resolution of either House of Parliament.

8 Amendments

Schedule 4 (which makes minor and consequential amendments about the disqualification of company directors, etc.) is to have effect.

Miscellaneous

9 Administration orders

(1) Part II of the [1986 c. 45.] Insolvency Act 1986 (administration orders) is amended as follows.

(2) In section 10 (effect of application), after paragraph (a) of subsection (1) there is inserted—

“(aa) no landlord or other person to whom rent is payable may exercise any right of forfeiture by peaceable re-entry in relation to premises let to the company in respect of a failure by the company to comply with any term or condition of its tenancy of such premises, except with the leave of the court and subject to such terms as the court may impose”.

(3) In section 11 (effect of order), after paragraph (b) of subsection (3) there is inserted—

“(ba) no landlord or other person to whom rent is payable may exercise any right of forfeiture by peaceable re-entry in relation to premises let to the company in respect of a failure by the company to comply with any term or condition of its tenancy of such premises, except with the consent of the administrator or the leave of the court and subject (where the court gives leave) to such terms as the court may impose”.

10 Investigation and prosecution of malpractice

(1) Section 218 of the [1986 c. 45.] Insolvency Act 1986 (prosecution of delinquent officers and members of company) is amended as follows.

(2) In subsection (1), for “to the prosecuting authority” there is substituted—

“(a) in the case of a winding up in England and Wales, to the Secretary of State, and

(b) in the case of a winding up in Scotland, to the Lord Advocate”.

(3) Subsection (2) is omitted.

(4) In subsection (4)—

(a) for the words from the beginning of paragraph (a) to “that authority” in paragraph (b) there is substituted “forthwith report the matter—

(a) in the case of a winding up in England and Wales, to the Secretary of State, and

(b) in the case of a winding up in Scotland, to the Lord Advocate,

and shall furnish to the Secretary of State or (as the case may be) the Lord Advocate”,

(b) for “the authority” there is substituted “the Secretary of State or (as the case may be) the Lord Advocate”.

(5) For subsection (5) there is substituted—

“(5) Where a report is made to the Secretary of State under subsection (4) he may, for the purpose of investigating the matter reported to him and such other matters relating to the affairs of the company as appear to him to require investigation, exercise any of the powers which are exercisable by inspectors appointed under section 431 or 432 of the Companies Act to investigate a company’s affairs.”

(6) In subsection (6)(b), “to the prosecuting authority” is omitted.

(7) In section 219 of that Act (obligations arising under section 218)—

(a) in subsection (1), for “under section 218(5)” there is substituted “in consequence of a report made to him under section 218(4)” and for “that subsection” there is substituted “section 218(5)”,

(b) in subsection (3), for “the prosecuting authority” and “that authority” there is substituted “the Director of Public Prosecutions, the Lord Advocate”,

(c) in subsection (4), for “prosecuting authority” there is substituted “Director of Public Prosecutions, the Lord Advocate”.

11 Restriction on use of answers obtained under compulsion

In section 219 of the [1986 c. 45.] Insolvency Act 1986, after subsection (2) (answers given by a person pursuant to powers conferred by section 218 may be used in evidence against him) there is inserted—

“(2A) However, in criminal proceedings in which that person is charged with an offence to which this subsection applies—

(a) no evidence relating to the answer may be adduced, and

(b) no question relating to it may be asked,

by or on behalf of the prosecution, unless evidence relating to it is adduced, or a question relating to it is asked, in the proceedings by or on behalf of that person.

(2B) Subsection (2A) applies to any offence other than—

(a) an offence under section 2 or 5 of the [1911 c. 6.] Perjury Act 1911 (false statements made on oath otherwise than in judicial proceedings or made otherwise than on oath), or

(b) an offence under section 44(1) or (2) of the [1995 c. 39.] Criminal Law (Consolidation) (Scotland) Act 1995 (false statements made on oath or otherwise than on oath).”

12 Insolvent estates of deceased persons

(1) After section 421 of the [1986 c. 45.] Insolvency Act 1986 (power to apply provisions of Act to insolvent estates of deceased persons) there is inserted—

“421A Insolvent estates: joint tenancies

(1) This section applies where—

(a) an insolvency administration order has been made in respect of the insolvent estate of a deceased person,

(b) the petition for the order was presented after the commencement of this section and within the period of five years beginning with the day on which he died, and

(c) immediately before his death he was beneficially entitled to an interest in any property as joint tenant.

(2) For the purpose of securing that debts and other liabilities to which the estate is subject are met, the court may, on an application by the trustee appointed pursuant to the insolvency administration order, make an order under this section requiring the survivor to pay to the trustee an amount not exceeding the value lost to the estate.

(3) In determining whether to make an order under this section, and the terms of such an order, the court must have regard to all the circumstances of the case, including the interests of the deceased’s creditors and of the survivor; but, unless the circumstances are exceptional, the court must assume that the interests of the deceased’s creditors outweigh all other considerations.

(4) The order may be made on such terms and conditions as the court thinks fit.

(5) Any sums required to be paid to the trustee in accordance with an order under this section shall be comprised in the estate.

(6) The modifications of this Act which may be made by an order under section 421 include any modifications which are necessary or expedient in consequence of this section.

(7) In this section, “survivor” means the person who, immediately before the death, was beneficially entitled as joint tenant with the deceased or, if the person who was so entitled dies after the making of the insolvency administration order, his personal representatives.

(8) If there is more than one survivor—

(a) an order under this section may be made against all or any of them, but

(b) no survivor shall be required to pay more than so much of the value lost to the estate as is properly attributable to him.

(9) In this section—

• “insolvency administration order” has the same meaning as in any order under section 421 having effect for the time being,

• “value lost to the estate” means the amount which, if paid to the trustee, would in the court’s opinion restore the position to what it would have been if the deceased had been adjudged bankrupt immediately before his death.”

(2) In subsection (1) of section 421, after “apply” there is inserted “in relation”.

13 Bankruptcy: interest on sums held in Insolvency Services Account

(1) In Schedule 9 to the [1986 c. 45.] Insolvency Act 1986 (individual insolvency rules), in paragraph 21, for “handled” there is substituted “invested or otherwise handled and with respect to the payment of interest on sums which, in pursuance of rules made by virtue of this paragraph, have been paid into the Insolvency Services Account”.

(2) In section 406 of that Act (interest on money received by liquidators and invested)—

(a) for “a company” there is substituted “or paragraph 21 of Schedule 9 to this Act (investment of money received by trustee in bankruptcy) a company or a bankrupt’s estate”,

(b) for the sidenote there is substituted “Interest on money received by liquidators or trustees in bankruptcy and invested”.

14 Model law on cross-border insolvency

(1) The Secretary of State may by regulations make any provision which he considers necessary or expedient for the purpose of giving effect, with or without modifications, to the model law on cross-border insolvency.

(2) In particular, the regulations may—

(a) apply any provision of insolvency law in relation to foreign proceedings (whether begun before or after the regulations come into force),

(b) modify the application of insolvency law (whether in relation to foreign proceedings or otherwise),

(c) amend any provision of section 426 of the [1986 c. 45.] Insolvency Act 1986 (co-operation between courts),

and may apply or, as the case may be, modify the application of insolvency law in relation to the Crown.

(3) The regulations may make different provision for different purposes and may make—

(a) any supplementary, incidental or consequential provision, or

(b) any transitory, transitional or saving provision,

which the Secretary of State considers necessary or expedient.

(4) In this section—

• “foreign proceedings” has the same meaning as in the model law on cross-border insolvency,

• “insolvency law” has the same meaning as in section 426(10)(a) and (b) of the [1986 c. 45.] Insolvency Act 1986,

• “the model law on cross-border insolvency” means the model law contained in Annex I of the report of the 30th session of UNCITRAL.

(5) Regulations under this section are to be made by statutory instrument and may only be made if a draft has been laid before and approved by resolution of each House of Parliament.

(6) Making regulations under this section requires the agreement—

(a) if they extend to England and Wales, of the Lord Chancellor,

(b) if they extend to Scotland, of the Scottish Ministers.

General

15 Amendments of Financial Services and Markets Act 2000 and repeals

(1) The enactments mentioned in Schedule 5 are repealed to the extent specified.

(2) For the purposes of the [2000 c. 8.] Financial Services and Markets Act 2000, the functions conferred on the Financial Services Authority by virtue of Schedules 1 and 2 are to be treated as conferred by that Act.

(3) Section 356 of that Act (Authority’s powers to participate in proceedings: company voluntary arrangements) is amended as follows—

(a) for subsection (1), there is substituted—

“(1) Where a voluntary arrangement has effect under Part I of the 1986 Act in respect of a company or insolvent partnership which is an authorised person, the Authority may apply to the court under section 6 or 7 of that Act.”,

(b) for subsection (2), there is substituted—

“(2) Where a voluntary arrangement has been approved under Part II of the 1989 Order in respect of a company or insolvent partnership which is an authorised person, the Authority may apply to the court under Article 19 or 20 of that Order.”,

(c) in subsection (3), for “either” there is substituted “any”.

16 Commencement

(1) The preceding provisions of this Act (including the Schedules) are to come into force on such day as the Secretary of State may by order made by statutory instrument appoint.

(2) Subsection (1) does not apply to section 14 (which accordingly comes into force on the day on which this Act is passed).

(3) An order under this section may make different provision for different purposes and may make—

(a) any supplementary, incidental or consequential provision, and

(b) any transitory, transitional or saving provision,

which the Secretary of State considers necessary or expedient.

17 Extent

This Act, except section 15(3), Part II of Schedule 2 and paragraphs 16(3) and 22 of Schedule 4, does not extend to Northern Ireland.

18 Short title

This Act may be cited as the Insolvency Act 2000.

SCHEDULES

Section 1.

SCHEDULE 1 Moratorium where directors propose voluntary arrangement

Amendments of the Insolvency Act 1986

1 The [1986 c. 45.] Insolvency Act 1986 is amended as provided in this Schedule.

2 After section 1 there is inserted—

“1A Moratorium

(1) Where the directors of an eligible company intend to make a proposal for a voluntary arrangement, they may take steps to obtain a moratorium for the company.

(2) The provisions of Schedule A1 to this Act have effect with respect to—

(a) companies eligible for a moratorium under this section,

(b) the procedure for obtaining such a moratorium,

(c) the effects of such a moratorium, and

(d) the procedure applicable (in place of sections 2 to 6 and 7) in relation to the approval and implementation of a voluntary arrangement where such a moratorium is or has been in force.”

3 In section 2(1) (procedure where nominee is not the liquidator or administrator), at the end there is added “and the directors do not propose to take steps to obtain a moratorium under section 1A for the company”.

4 Before Schedule 1 there is inserted—

“SCHEDULE A1 Moratorium where directors propose voluntary arrangement

Part I Introductory

Interpretation

1 In this Schedule—

• “the beginning of the moratorium” has the meaning given by paragraph 8(1),

• “the date of filing” means the date on which the documents for the time being referred to in paragraph 7(1) are filed or lodged with the court,

• “hire-purchase agreement” includes a conditional sale agreement, a chattel leasing agreement and a retention of title agreement,

• “market contract” and “market charge” have the meanings given by Part VII of the [1989 c. 40.] Companies Act 1989,

• “money market contract” and “money market charge” have the meanings given by the [S.I. 1995/2049] Financial Markets and Insolvency (Money Market) Regulations 1995 (“the 1995 regulations”),

• “moratorium” means a moratorium under section 1A,

• “the nominee” includes any person for the time being carrying out the functions of a nominee under this Schedule,

• “related contract” has the meaning given by the 1995 regulations,

• “the settlement finality regulations” means the [S.I. 1999/2979.] Financial Markets and Insolvency (Settlement Finality) Regulations 1999,

• “system-charge” has the meaning given by the [S.I. 1996/1469] Financial Markets and Insolvency Regulations 1996.

Eligible companies

2 (1) A company is eligible for a moratorium if it meets the requirements of paragraph 3, unless—

(a) it is excluded from being eligible by virtue of paragraph 4, or

(b) it falls within sub-paragraph (2).

(2) A company falls within this sub-paragraph if—

(a) it is an insurance company within the meaning of the [1982 c. 50.] Insurance Companies Act 1982,

(b) it is an authorised institution or former authorised institution within the meaning of the [1987 c. 22.] Banking Act 1987,

(c) it is a party to a market contract, a money market contract or a related contract or any of its property is subject to a market charge, a money market charge or a system-charge, or

(d) it is a participant (within the meaning of the settlement finality regulations) or any of its property is subject to a collateral security charge (within the meaning of those regulations).

3 (1) A company meets the requirements of this paragraph if the qualifying conditions are met—

(a) in the year ending with the date of filing, or

(b) in the financial year of the company which ended last before that date.

(2) For the purposes of sub-paragraph (1)—

(a) the qualifying conditions are met by a company in a period if, in that period, it satisfies two or more of the requirements for being a small company specified for the time being in section 247(3) of the [1985 c. 6.] Companies Act 1985, and

(b) a company’s financial year is to be determined in accordance with that Act.

(3) Subsections (4), (5) and (6) of section 247 of that Act apply for the purposes of this paragraph as they apply for the purposes of that section.

4 (1) A company is excluded from being eligible for a moratorium if, on the date of filing—

(a) an administration order is in force in relation to the company,

(b) the company is being wound up,

(c) there is an administrative receiver of the company,

(d) a voluntary arrangement has effect in relation to the company,

(e) there is a provisional liquidator of the company,

(f) a moratorium has been in force for the company at any time during the period of 12 months ending with the date of filing and—

(i) no voluntary arrangement had effect at the time at which the moratorium came to an end, or

(ii) a voluntary arrangement which had effect at any time in that period has come to an end prematurely, or

(g) a voluntary arrangement in relation to the company which had effect in pursuance of a proposal under section 1(3) has come to an end prematurely and, during the period of 12 months ending with the date of filing, an order under section 5(3)(a) has been made.

(2) Sub-paragraph (1)(b) does not apply to a company which, by reason of a winding-up order made after the date of filing, is treated as being wound up on that date.

5 The Secretary of State may by regulations modify the qualifications for eligibility of a company for a moratorium.

Part II Obtaining a moratorium

Nominee’s statement

6 (1) Where the directors of a company wish to obtain a moratorium, they shall submit to the nominee—

(a) a document setting out the terms of the proposed voluntary arrangement,

(b) a statement of the company’s affairs containing—

(i) such particulars of its creditors and of its debts and other liabilities and of its assets as may be prescribed, and

(ii) such other information as may be prescribed, and

(c) any other information necessary to enable the nominee to comply with sub-paragraph (2) which he requests from them.

(2) The nominee shall submit to the directors a statement in the prescribed form indicating whether or not, in his opinion—

(a) the proposed voluntary arrangement has a reasonable prospect of being approved and implemented,

(b) the company is likely to have sufficient funds available to it during the proposed moratorium to enable it to carry on its business, and

(c) meetings of the company and its creditors should be summoned to consider the proposed voluntary arrangement.

(3) In forming his opinion on the matters mentioned in sub-paragraph (2), the nominee is entitled to rely on the information submitted to him under sub-paragraph (1) unless he has reason to doubt its accuracy.

(4) The reference in sub-paragraph (2)(b) to the company’s business is to that business as the company proposes to carry it on during the moratorium.

Documents to be submitted to court

7 (1) To obtain a moratorium the directors of a company must file (in Scotland, lodge) with the court—

(a) a document setting out the terms of the proposed voluntary arrangement,

(b) a statement of the company’s affairs containing—

(i) such particulars of its creditors and of its debts and other liabilities and of its assets as may be prescribed, and

(ii) such other information as may be prescribed,

(c) a statement that the company is eligible for a moratorium,

(d) a statement from the nominee that he has given his consent to act, and

(e) a statement from the nominee that, in his opinion—

(i) the proposed voluntary arrangement has a reasonable prospect of being approved and implemented,

(ii) the company is likely to have sufficient funds available to it during the proposed moratorium to enable it to carry on its business, and

(iii) meetings of the company and its creditors should be summoned to consider the proposed voluntary arrangement.

(2) Each of the statements mentioned in sub-paragraph (1)(b) to (e), except so far as it contains the particulars referred to in paragraph (b)(i), must be in the prescribed form.

(3) The reference in sub-paragraph (1)(e)(ii) to the company’s business is to that business as the company proposes to carry it on during the moratorium.

(4) The Secretary of State may by regulations modify the requirements of this paragraph as to the documents required to be filed (in Scotland, lodged) with the court in order to obtain a moratorium.

Duration of moratorium

8 (1) A moratorium comes into force when the documents for the time being referred to in paragraph 7(1) are filed or lodged with the court and references in this Schedule to “the beginning of the moratorium” shall be construed accordingly.

(2) A moratorium ends at the end of the day on which the meetings summoned under paragraph 29(1) are first held (or, if the meetings are held on different days, the later of those days), unless it is extended under paragraph 32.

(3) If either of those meetings has not first met before the end of the period of 28 days beginning with the day on which the moratorium comes into force, the moratorium ends at the end of the day on which those meetings were to be held (or, if those meetings were summoned to be held on different days, the later of those days), unless it is extended under paragraph 32.

(4) If the nominee fails to summon either meeting within the period required by paragraph 29(1), the moratorium ends at the end of the last day of that period.

(5) If the moratorium is extended (or further extended) under paragraph 32, it ends at the end of the day to which it is extended (or further extended).

(6) Sub-paragraphs (2) to (5) do not apply if the moratorium comes to an end before the time concerned by virtue of—

(a) paragraph 25(4) (effect of withdrawal by nominee of consent to act),

(b) an order under paragraph 26(3), 27(3) or 40 (challenge of actions of nominee or directors), or

(c) a decision of one or both of the meetings summoned under paragraph 29.

(7) If the moratorium has not previously come to an end in accordance with sub-paragraphs (2) to (6), it ends at the end of the day on which a decision under paragraph 31 to approve a voluntary arrangement takes effect under paragraph 36.

(8) The Secretary of State may by order increase or reduce the period for the time being specified in sub-paragraph (3).

Notification of beginning of moratorium

9 (1) When a moratorium comes into force, the directors shall notify the nominee of that fact forthwith.

(2) If the directors without reasonable excuse fail to comply with sub-paragraph (1), each of them is liable to imprisonment or a fine, or both.

10 (1) When a moratorium comes into force, the nominee shall, in accordance with the rules—

(a) advertise that fact forthwith, and

(b) notify the registrar of companies, the company and any petitioning creditor of the company of whose claim he is aware of that fact.

(2) In sub-paragraph (1)(b), “petitioning creditor” means a creditor by whom a winding-up petition has been presented before the beginning of the moratorium, as long as the petition has not been dismissed or withdrawn.

(3) If the nominee without reasonable excuse fails to comply with sub-paragraph (1)(a) or (b), he is liable to a fine.

Notification of end of moratorium

11 (1) When a moratorium comes to an end, the nominee shall, in accordance with the rules—

(a) advertise that fact forthwith, and

(b) notify the court, the registrar of companies, the company and any creditor of the company of whose claim he is aware of that fact.

(2) If the nominee without reasonable excuse fails to comply with sub-paragraph (1)(a) or (b), he is liable to a fine.

Part III Effects of moratorium

Effect on creditors, etc.

12 (1) During the period for which a moratorium is in force for a company—

(a) no petition may be presented for the winding up of the company,

(b) no meeting of the company may be called or requisitioned except with the consent of the nominee or the leave of the court and subject (where the court gives leave) to such terms as the court may impose,

(c) no resolution may be passed or order made for the winding up of the company,

(d) no petition for an administration order in relation to the company may be presented,

(e) no administrative receiver of the company may be appointed,

(f) no landlord or other person to whom rent is payable may exercise any right of forfeiture by peaceable re-entry in relation to premises let to the company in respect of a failure by the company to comply with any term or condition of its tenancy of such premises, except with the leave of the court and subject to such terms as the court may impose,

(g) no other steps may be taken to enforce any security over the company’s property, or to repossess goods in the company’s possession under any hire-purchase agreement, except with the leave of the court and subject to such terms as the court may impose, and

(h) no other proceedings and no execution or other legal process may be commenced or continued, and no distress may be levied, against the company or its property except with the leave of the court and subject to such terms as the court may impose.

(2) Where a petition, other than an excepted petition, for the winding up of the company has been presented before the beginning of the moratorium, section 127 shall not apply in relation to any disposition of property, transfer of shares or alteration in status made during the moratorium or at a time mentioned in paragraph 37(5)(a).

(3) In the application of sub-paragraph (1)(h) to Scotland, the reference to execution being commenced or continued includes a reference to diligence being carried out or continued, and the reference to distress being levied is omitted.

(4) Paragraph (a) of sub-paragraph (1) does not apply to an excepted petition and, where such a petition has been presented before the beginning of the moratorium or is presented during the moratorium, paragraphs (b) and (c) of that sub-paragraph do not apply in relation to proceedings on the petition.

(5) For the purposes of this paragraph, “excepted petition” means a petition under—

(a) section 124A of this Act,

(b) section 72 of the [1986 c. 60.] Financial Services Act 1986 on the ground mentioned in subsection (1)(b) of that section, or

(c) section 92 of the [1987 c. 22.] Banking Act 1987 on the ground mentioned in subsection (1)(b) of that section.

13 (1) This paragraph applies where there is an uncrystallised floating charge on the property of a company for which a moratorium is in force.

(2) If the conditions for the holder of the charge to give a notice having the effect mentioned in sub-paragraph (4) are met at any time, the notice may not be given at that time but may instead be given as soon as practicable after the moratorium has come to an end.

(3) If any other event occurs at any time which (apart from this sub-paragraph) would have the effect mentioned in sub-paragraph (4), then—

(a) the event shall not have the effect in question at that time, but

(b) if notice of the event is given to the company by the holder of the charge as soon as is practicable after the moratorium has come to an end, the event is to be treated as if it had occurred when the notice was given.

(4) The effect referred to in sub-paragraphs (2) and (3) is—

(a) causing the crystallisation of the floating charge, or

(b) causing the imposition, by virtue of provision in the instrument creating the charge, of any restriction on the disposal of any property of the company.

(5) Application may not be made for leave under paragraph 12(1)(g) or (h) with a view to obtaining—

(a) the crystallisation of the floating charge, or

(b) the imposition, by virtue of provision in the instrument creating the charge, of any restriction on the disposal of any property of the company.

14 Security granted by a company at a time when a moratorium is in force in relation to the company may only be enforced if, at that time, there were reasonable grounds for believing that it would benefit the company.

Effect on company

15 (1) Paragraphs 16 to 23 apply in relation to a company for which a moratorium is in force.

(2) The fact that a company enters into a transaction in contravention of any of paragraphs 16 to 22 does not—

(a) make the transaction void, or

(b) make it to any extent unenforceable against the company.

Company invoices, etc.

16 (1) Every invoice, order for goods or business letter which—

(a) is issued by or on behalf of the company, and

(b) on or in which the company’s name appears,

shall also contain the nominee’s name and a statement that the moratorium is in force for the company.

(2) If default is made in complying with sub-paragraph (1), the company and (subject to sub-paragraph (3)) any officer of the company is liable to a fine.

(3) An officer of the company is only liable under sub-paragraph (2) if, without reasonable excuse, he authorises or permits the default.

Obtaining credit during moratorium

17 (1) The company may not obtain credit to the extent of £250 or more from a person who has not been informed that a moratorium is in force in relation to the company.

(2) The reference to the company obtaining credit includes the following cases—

(a) where goods are bailed (in Scotland, hired) to the company under a hire-purchase agreement, or agreed to be sold to the company under a conditional sale agreement, and

(b) where the company is paid in advance (whether in money or otherwise) for the supply of goods or services.

(3) Where the company obtains credit in contravention of sub-paragraph (1)—

(a) the company is liable to a fine, and

(b) if any officer of the company knowingly and wilfully authorised or permitted the contravention, he is liable to imprisonment or a fine, or both.

(4) The money sum specified in sub-paragraph (1) is subject to increase or reduction by order under section 417A in Part XV.

Disposals and payments

18 (1) Subject to sub-paragraph (2), the company may only dispose of any of its property if—

(a) there are reasonable grounds for believing that the disposal will benefit the company, and

(b) the disposal is approved by the committee established under paragraph 35(1) or, where there is no such committee, by the nominee.

(2) Sub-paragraph (1) does not apply to a disposal made in the ordinary way of the company’s business.

(3) If the company makes a disposal in contravention of sub-paragraph (1) otherwise than in pursuance of an order of the court—

(a) the company is liable to a fine, and

(b) if any officer of the company authorised or permitted the contravention, without reasonable excuse, he is liable to imprisonment or a fine, or both.

19 (1) Subject to sub-paragraph (2), the company may only make any payment in respect of any debt or other liability of the company in existence before the beginning of the moratorium if—

(a) there are reasonable grounds for believing that the payment will benefit the company, and

(b) the payment is approved by the committee established under paragraph 35(1) or, where there is no such committee, by the nominee.

(2) Sub-paragraph (1) does not apply to a payment required by paragraph 20(6).

(3) If the company makes a payment in contravention of sub-paragraph (1) otherwise than in pursuance of an order of the court—

(a) the company is liable to a fine, and

(b) if any officer of the company authorised or permitted the contravention, without reasonable excuse, he is liable to imprisonment or a fine, or both.

Disposal of charged property, etc.

20 (1) This paragraph applies where—

(a) any property of the company is subject to a security, or

(b) any goods are in the possession of the company under a hire-purchase agreement.

(2) If the holder of the security consents, or the court gives leave, the company may dispose of the property as if it were not subject to the security.

(3) If the owner of the goods consents, or the court gives leave, the company may dispose of the goods as if all rights of the owner under the hire-purchase agreement were vested in the company.

(4) Where property subject to a security which, as created, was a floating charge is disposed of under sub-paragraph (2), the holder of the security has the same priority in respect of any property of the company directly or indirectly representing the property disposed of as he would have had in respect of the property subject to the security.

(5) Sub-paragraph (6) applies to the disposal under sub-paragraph (2) or (as the case may be) sub-paragraph (3) of—

(a) any property subject to a security other than a security which, as created, was a floating charge, or

(b) any goods in the possession of the company under a hire-purchase agreement.

(6) It shall be a condition of any consent or leave under sub-paragraph (2) or (as the case may be) sub-paragraph (3) that—

(a) the net proceeds of the disposal, and

(b) where those proceeds are less than such amount as may be agreed, or determined by the court, to be the net amount which would be realised on a sale of the property or goods in the open market by a willing vendor, such sums as may be required to make good the deficiency,

shall be applied towards discharging the sums secured by the security or payable under the hire-purchase agreement.

(7) Where a condition imposed in pursuance of sub-paragraph (6) relates to two or more securities, that condition requires—

(a) the net proceeds of the disposal, and

(b) where paragraph (b) of sub-paragraph (6) applies, the sums mentioned in that paragraph,

to be applied towards discharging the sums secured by those securities in the order of their priorities.

(8) Where the court gives leave for a disposal under sub-paragraph (2) or (3), the directors shall, within 14 days after leave is given, send an office copy of the order giving leave to the registrar of companies.

(9) If the directors without reasonable excuse fail to comply with sub-paragraph (8), they are liable to a fine.

21 (1) Where property is disposed of under paragraph 20 in its application to Scotland, the company shall grant to the disponee an appropriate document of transfer or conveyance of the property, and

(a) that document, or

(b) where any recording, intimation or registration of the document is a legal requirement for completion of title to the property, that recording, intimation or registration,

has the effect of disencumbering the property of, or (as the case may be) freeing the property from, the security.

(2) Where goods in the possession of the company under a hire-purchase agreement are disposed of under paragraph 20 in its application to Scotland, the disposal has the effect of extinguishing, as against the disponee, all rights of the owner of the goods under the agreement.

22 (1) If the company—

(a) without any consent or leave under paragraph 20, disposes of any of its property which is subject to a security otherwise than in accordance with the terms of the security,

(b) without any consent or leave under paragraph 20, disposes of any goods in the possession of the company under a hire-purchase agreement otherwise than in accordance with the terms of the agreement, or

(c) fails to comply with any requirement imposed by paragraph 20 or 21,

it is liable to a fine.

(2) If any officer of the company, without reasonable excuse, authorises or permits any such disposal or failure to comply, he is liable to imprisonment or a fine, or both.

Market contracts, etc.

23 (1) If the company enters into any transaction to which this paragraph applies—