SCHEDULE 1 continued AMENDMENTS OF THE INSOLVENCY ACT 1986 continued
25 (1) The nominee may only withdraw his consent to act in the circumstances mentioned in this paragraph.
(2) The nominee must withdraw his consent to act if, at any time during a moratorium—
(a) he forms the opinion that—
(i) the proposed voluntary arrangement or, if he has received notice of proposed modifications under paragraph 31(7), the proposed arrangement with those modifications no longer has a reasonable prospect of being approved or implemented, or
(ii) the company will not have sufficient funds available to it during the remainder of the moratorium to enable it to continue to carry on its business,
(b) he becomes aware that, on the date of filing, the company was not eligible for a moratorium, or
(c) the directors fail to comply with their duty under paragraph 24(2).
(3) The reference in sub-paragraph (2)(a)(ii) to the company’s business is to that business as the company proposes to carry it on during the remainder of the moratorium.
(4) If the nominee withdraws his consent to act, the moratorium comes to an end.
(5) If the nominee withdraws his consent to act he must, in accordance with the rules, notify the court, the registrar of companies, the company and any creditor of the company of whose claim he is aware of his withdrawal and the reason for it.
(6) If the nominee without reasonable excuse fails to comply with sub-paragraph (5), he is liable to a fine.
26 (1) If any creditor, director or member of the company, or any other person affected by a moratorium, is dissatisfied by any act, omission or decision of the nominee during the moratorium, he may apply to the court.
(2) An application under sub-paragraph (1) may be made during the moratorium or after it has ended.
(3) On an application under sub-paragraph (1) the court may—
(a) confirm, reverse or modify any act or decision of the nominee,
(b) give him directions, or
(c) make such other order as it thinks fit.
(4) An order under sub-paragraph (3) may (among other things) bring the moratorium to an end and make such consequential provision as the court thinks fit.
27 (1) Where there are reasonable grounds for believing that—
(a) as a result of any act, omission or decision of the nominee during the moratorium, the company has suffered loss, but
(b) the company does not intend to pursue any claim it may have against the nominee,
any creditor of the company may apply to the court.
(2) An application under sub-paragraph (1) may be made during the moratorium or after it has ended.
(3) On an application under sub-paragraph (1) the court may—
(a) order the company to pursue any claim against the nominee,
(b) authorise any creditor to pursue such a claim in the name of the company, or
(c) make such other order with respect to such a claim as it thinks fit,
unless the court is satisfied that the act, omission or decision of the nominee was in all the circumstances reasonable.
(4) An order under sub-paragraph (3) may (among other things)—
(a) impose conditions on any authority given to pursue a claim,
(b) direct the company to assist in the pursuit of a claim,
(c) make directions with respect to the distribution of anything received as a result of the pursuit of a claim,
(d) bring the moratorium to an end and make such consequential provision as the court thinks fit.
(5) On an application under sub-paragraph (1) the court shall have regard to the interests of the members and creditors of the company generally.
28 (1) The court may—
(a) on an application made by the directors in a case where the nominee has failed to comply with any duty imposed on him under this Schedule or has died, or
(b) on an application made by the directors or the nominee in a case where it is impracticable or inappropriate for the nominee to continue to act as such,
direct that the nominee be replaced as such by another person qualified to act as an insolvency practitioner, or authorised to act as nominee, in relation to the voluntary arrangement.
(2) A person may only be appointed as a replacement nominee under this paragraph if he submits to the court a statement indicating his consent to act.
29 (1) Where a moratorium is in force, the nominee shall summon meetings of the company and its creditors for such a time, date (within the period for the time being specified in paragraph 8(3)) and place as he thinks fit.
(2) The persons to be summoned to a creditors' meeting under this paragraph are every creditor of the company of whose claim the nominee is aware.
30 (1) Subject to the provisions of paragraphs 31 to 35, the meetings summoned under paragraph 29 shall be conducted in accordance with the rules.
(2) A meeting so summoned may resolve that it be adjourned (or further adjourned).
(3) After the conclusion of either meeting in accordance with the rules, the chairman of the meeting shall report the result of the meeting to the court, and, immediately after reporting to the court, shall give notice of the result of the meeting to such persons as may be prescribed.
31 (1) The meetings summoned under paragraph 29 shall decide whether to approve the proposed voluntary arrangement (with or without modifications).
(2) The modifications may include one conferring the functions proposed to be conferred on the nominee on another person qualified to act as an insolvency practitioner, or authorised to act as nominee, in relation to the voluntary arrangement.
(3) The modifications shall not include one by virtue of which the proposal ceases to be a proposal such as is mentioned in section 1.
(4) A meeting summoned under paragraph 29 shall not approve any proposal or modification which affects the right of a secured creditor of the company to enforce his security, except with the concurrence of the creditor concerned.
(5) Subject to sub-paragraph (6), a meeting so summoned shall not approve any proposal or modification under which—
(a) any preferential debt of the company is to be paid otherwise than in priority to such of its debts as are not preferential debts, or
(b) a preferential creditor of the company is to be paid an amount in respect of a preferential debt that bears to that debt a smaller proportion than is borne to another preferential debt by the amount that is to be paid in respect of that other debt.
(6) The meeting may approve such a proposal or modification with the concurrence of the preferential creditor concerned.
(7) The directors of the company may, before the beginning of the period of seven days which ends with the meetings (or either of them) summoned under paragraph 29 being held, give notice to the nominee of any modifications of the proposal for which the directors intend to seek the approval of those meetings.
(8) References in this paragraph to preferential debts and preferential creditors are to be read in accordance with section 386 in Part XII of this Act.
32 (1) Subject to sub-paragraph (2), a meeting summoned under paragraph 29 which resolves that it be adjourned (or further adjourned) may resolve that the moratorium be extended (or further extended), with or without conditions.
(2) The moratorium may not be extended (or further extended) to a day later than the end of the period of two months which begins—
(a) where both meetings summoned under paragraph 29 are first held on the same day, with that day,
(b) in any other case, with the day on which the later of those meetings is first held.
(3) At any meeting where it is proposed to extend (or further extend) the moratorium, before a decision is taken with respect to that proposal, the nominee shall inform the meeting—
(a) of what he has done in order to comply with his duty under paragraph 24 and the cost of his actions for the company, and
(b) of what he intends to do to continue to comply with that duty if the moratorium is extended (or further extended) and the expected cost of his actions for the company.
(4) Where, in accordance with sub-paragraph (3)(b), the nominee informs a meeting of the expected cost of his intended actions, the meeting shall resolve whether or not to approve that expected cost.
(5) If a decision not to approve the expected cost of the nominee’s intended actions has effect under paragraph 36, the moratorium comes to an end.
(6) A meeting may resolve that a moratorium which has been extended (or further extended) be brought to an end before the end of the period of the extension (or further extension).
(7) The Secretary of State may by order increase or reduce the period for the time being specified in sub-paragraph (2).
33 (1) The conditions which may be imposed when a moratorium is extended (or further extended) include a requirement that the nominee be replaced as such by another person qualified to act as an insolvency practitioner, or authorised to act as nominee, in relation to the voluntary arrangement.
(2) A person may only be appointed as a replacement nominee by virtue of sub-paragraph (1) if he submits to the court a statement indicating his consent to act.
(3) At any meeting where it is proposed to appoint a replacement nominee as a condition of extending (or further extending) the moratorium—
(a) the duty imposed by paragraph 32(3)(b) on the nominee shall instead be imposed on the person proposed as the replacement nominee, and
(b) paragraphs 32(4) and (5) and 36(1)(e) apply as if the references to the nominee were to that person.
34 (1) If a decision to extend, or further extend, the moratorium takes effect under paragraph 36, the nominee shall, in accordance with the rules, notify the registrar of companies and the court.
(2) If the moratorium is extended, or further extended, by virtue of an order under paragraph 36(5), the nominee shall, in accordance with the rules, send an office copy of the order to the registrar of companies.
(3) If the nominee without reasonable excuse fails to comply with this paragraph, he is liable to a fine.
35 (1) A meeting summoned under paragraph 29 which resolves that the moratorium be extended (or further extended) may, with the consent of the nominee, resolve that a committee be established to exercise the functions conferred on it by the meeting.
(2) The meeting may not so resolve unless it has approved an estimate of the expenses to be incurred by the committee in the exercise of the proposed functions.
(3) Any expenses, not exceeding the amount of the estimate, incurred by the committee in the exercise of its functions shall be reimbursed by the nominee.
(4) The committee shall cease to exist when the moratorium comes to an end.
36 (1) Sub-paragraph (2) applies to references to one of the following decisions having effect, that is, a decision, under paragraph 31, 32 or 35, with respect to—
(a) the approval of a proposed voluntary arrangement,
(b) the extension (or further extension) of a moratorium,
(c) the bringing of a moratorium to an end,
(d) the establishment of a committee, or
(e) the approval of the expected cost of a nominee’s intended actions.
(2) The decision has effect if, in accordance with the rules—
(a) it has been taken by both meetings summoned under paragraph 29, or
(b) (subject to any order made under sub-paragraph (5)) it has been taken by the creditors' meeting summoned under that paragraph.
(3) If a decision taken by the creditors' meeting under any of paragraphs 31, 32 or 35 with respect to any of the matters mentioned in sub-paragraph (1) differs from one so taken by the company meeting with respect to that matter, a member of the company may apply to the court.
(4) An application under sub-paragraph (3) shall not be made after the end of the period of 28 days beginning with—
(a) the day on which the decision was taken by the creditors' meeting, or
(b) where the decision of the company meeting was taken on a later day, that day.
(5) On an application under sub-paragraph (3), the court may—
(a) order the decision of the company meeting to have effect instead of the decision of the creditors' meeting, or
(b) make such other order as it thinks fit.
37 (1) This paragraph applies where a decision approving a voluntary arrangement has effect under paragraph 36.
(2) The approved voluntary arrangement—
(a) takes effect as if made by the company at the creditors' meeting, and
(b) binds every person who in accordance with the rules—
(i) was entitled to vote at that meeting (whether or not he was present or represented at it), or
(ii) would have been so entitled if he had had notice of it,
as if he were a party to the voluntary arrangement.
(3) If—
(a) when the arrangement ceases to have effect any amount payable under the arrangement to a person bound by virtue of sub-paragraph (2)(b)(ii) has not been paid, and
(b) the arrangement did not come to an end prematurely,
the company shall at that time become liable to pay to that person the amount payable under the arrangement.
(4) Where a petition for the winding up of the company, other than an excepted petition within the meaning of paragraph 12, was presented before the beginning of the moratorium, the court shall dismiss the petition.
(5) The court shall not dismiss a petition under sub-paragraph (4)—
(a) at any time before the end of the period of 28 days beginning with the first day on which each of the reports of the meetings required by paragraph 30(3) has been made to the court, or
(b) at any time when an application under paragraph 38 or an appeal in respect of such an application is pending, or at any time in the period within which such an appeal may be brought.
38 (1) Subject to the following provisions of this paragraph, any of the persons mentioned in sub-paragraph (2) may apply to the court on one or both of the following grounds—
(a) that a voluntary arrangement approved at one or both of the meetings summoned under paragraph 29 and which has taken effect unfairly prejudices the interests of a creditor, member or contributory of the company,
(b) that there has been some material irregularity at or in relation to either of those meetings.
(2) The persons who may apply under this paragraph are—
(a) a person entitled, in accordance with the rules, to vote at either of the meetings,
(b) a person who would have been entitled, in accordance with the rules, to vote at the creditors' meeting if he had had notice of it, and
(c) the nominee.
(3) An application under this paragraph shall not be made—
(a) after the end of the period of 28 days beginning with the first day on which each of the reports required by paragraph 30(3) has been made to the court, or
(b) in the case of a person who was not given notice of the creditors' meeting, after the end of the period of 28 days beginning with the day on which he became aware that the meeting had taken place,
but (subject to that) an application made by a person within sub-paragraph (2)(b) on the ground that the arrangement prejudices his interests may be made after the arrangement has ceased to have effect, unless it came to an end prematurely.
(4) Where on an application under this paragraph the court is satisfied as to either of the grounds mentioned in sub-paragraph (1), it may do any of the following—
(a) revoke or suspend—
(i) any decision approving the voluntary arrangement which has effect under paragraph 36, or
(ii) in a case falling within sub-paragraph (1)(b), any decision taken by the meeting in question which has effect under that paragraph,
(b) give a direction to any person—
(i) for the summoning of further meetings to consider any revised proposal for a voluntary arrangement which the directors may make, or
(ii) in a case falling within sub-paragraph (1)(b), for the summoning of a further company or (as the case may be) creditors' meeting to reconsider the original proposal.
(5) Where at any time after giving a direction under sub-paragraph (4)(b)(i) the court is satisfied that the directors do not intend to submit a revised proposal, the court shall revoke the direction and revoke or suspend any decision approving the voluntary arrangement which has effect under paragraph 36.
(6) Where the court gives a direction under sub-paragraph (4)(b), it may also give a direction continuing or, as the case may require, renewing, for such period as may be specified in the direction, the effect of the moratorium.
(7) Sub-paragraph (8) applies in a case where the court, on an application under this paragraph—
(a) gives a direction under sub-paragraph (4)(b), or
(b) revokes or suspends a decision under sub-paragraph (4)(a) or (5).
(8) In such a case, the court may give such supplemental directions as it thinks fit and, in particular, directions with respect to—
(a) things done under the voluntary arrangement since it took effect, and
(b) such things done since that time as could not have been done if a moratorium had been in force in relation to the company when they were done.
(9) Except in pursuance of the preceding provisions of this paragraph, a decision taken at a meeting summoned under paragraph 29 is not invalidated by any irregularity at or in relation to the meeting.
39 (1) This paragraph applies where a voluntary arrangement approved by one or both of the meetings summoned under paragraph 29 has taken effect.
(2) The person who is for the time being carrying out in relation to the voluntary arrangement the functions conferred—
(a) by virtue of the approval of the arrangement, on the nominee, or
(b) by virtue of paragraph 31(2), on a person other than the nominee,
shall be known as the supervisor of the voluntary arrangement.
(3) If any of the company’s creditors or any other person is dissatisfied by any act, omission or decision of the supervisor, he may apply to the court.
(4) On an application under sub-paragraph (3) the court may—
(a) confirm, reverse or modify any act or decision of the supervisor,
(b) give him directions, or
(c) make such other order as it thinks fit.
(5) The supervisor—
(a) may apply to the court for directions in relation to any particular matter arising under the voluntary arrangement, and
(b) is included among the persons who may apply to the court for the winding up of the company or for an administration order to be made in relation to it.
(6) The court may, whenever—
(a) it is expedient to appoint a person to carry out the functions of the supervisor, and
(b) it is inexpedient, difficult or impracticable for an appointment to be made without the assistance of the court,
make an order appointing a person who is qualified to act as an insolvency practitioner, or authorised to act as supervisor, in relation to the voluntary arrangement, either in substitution for the existing supervisor or to fill a vacancy.
(7) The power conferred by sub-paragraph (6) is exercisable so as to increase the number of persons exercising the functions of supervisor or, where there is more than one person exercising those functions, so as to replace one or more of those persons.
40 (1) This paragraph applies in relation to acts or omissions of the directors of a company during a moratorium.
(2) A creditor or member of the company may apply to the court for an order under this paragraph on the ground—
(a) that the company’s affairs, business and property are being or have been managed by the directors in a manner which is unfairly prejudicial to the interests of its creditors or members generally, or of some part of its creditors or members (including at least the petitioner), or
(b) that any actual or proposed act or omission of the directors is or would be so prejudicial.
(3) An application for an order under this paragraph may be made during or after the moratorium.
(4) On an application for an order under this paragraph the court may—
(a) make such order as it thinks fit for giving relief in respect of the matters complained of,
(b) adjourn the hearing conditionally or unconditionally, or
(c) make an interim order or any other order that it thinks fit.
(5) An order under this paragraph may in particular—
(a) regulate the management by the directors of the company’s affairs, business and property during the remainder of the moratorium,
(b) require the directors to refrain from doing or continuing an act complained of by the petitioner, or to do an act which the petitioner has complained they have omitted to do,
(c) require the summoning of a meeting of creditors or members for the purpose of considering such matters as the court may direct,
(d) bring the moratorium to an end and make such consequential provision as the court thinks fit.
(6) In making an order under this paragraph the court shall have regard to the need to safeguard the interests of persons who have dealt with the company in good faith and for value.
(7) In relation to any time when an administration order is in force in relation to the company, or the company is being wound up, in pursuance of a petition presented before the moratorium came into force, no application for an order under this paragraph may be made by a creditor or member of the company; but such an application may be made instead by the administrator or (as the case may be) liquidator.
41 (1) This paragraph applies where a moratorium has been obtained for a company.
(2) If, within the period of 12 months ending with the day on which the moratorium came into force, a person who was at the time an officer of the company—
(a) did any of the things mentioned in paragraphs (a) to (f) of sub-paragraph (4), or
(b) was privy to the doing by others of any of the things mentioned in paragraphs (c), (d) and (e) of that sub-paragraph,
he is to be treated as having committed an offence at that time.
(3) If, at any time during the moratorium, a person who is an officer of the company—
(a) does any of the things mentioned in paragraphs (a) to (f) of sub-paragraph (4), or
(b) is privy to the doing by others of any of the things mentioned in paragraphs (c), (d) and (e) of that sub-paragraph,
he commits an offence.
(4) Those things are—
(a) concealing any part of the company’s property to the value of £500 or more, or concealing any debt due to or from the company, or
(b) fraudulently removing any part of the company’s property to the value of £500 or more, or
(c) concealing, destroying, mutilating or falsifying any book or paper affecting or relating to the company’s property or affairs, or
(d) making any false entry in any book or paper affecting or relating to the company’s property or affairs, or
(e) fraudulently parting with, altering or making any omission in any document affecting or relating to the company’s property or affairs, or
(f) pawning, pledging or disposing of any property of the company which has been obtained on credit and has not been paid for (unless the pawning, pledging or disposal was in the ordinary way of the company’s business).
(5) For the purposes of this paragraph, “officer” includes a shadow director.
(6) It is a defence—
(a) for a person charged under sub-paragraph (2) or (3) in respect of the things mentioned in paragraph (a) or (f) of sub-paragraph (4) to prove that he had no intent to defraud, and
(b) for a person charged under sub-paragraph (2) or (3) in respect of the things mentioned in paragraph (c) or (d) of sub-paragraph (4) to prove that he had no intent to conceal the state of affairs of the company or to defeat the law.
(7) Where a person pawns, pledges or disposes of any property of a company in circumstances which amount to an offence under sub-paragraph (2) or (3), every person who takes in pawn or pledge, or otherwise receives, the property knowing it to be pawned, pledged or disposed of in circumstances which—
(a) would, if a moratorium were obtained for the company within the period of 12 months beginning with the day on which the pawning, pledging or disposal took place, amount to an offence under sub-paragraph (2), or
(b) amount to an offence under sub-paragraph (3),
commits an offence.
(8) A person guilty of an offence under this paragraph is liable to imprisonment or a fine, or both.
(9) The money sums specified in paragraphs (a) and (b) of sub-paragraph (4) are subject to increase or reduction by order under section 417A in Part XV.
42 (1) If, for the purpose of obtaining a moratorium, or an extension of a moratorium, for a company, a person who is an officer of the company—
(a) makes any false representation, or
(b) fraudulently does, or omits to do, anything,
he commits an offence.
(2) Sub-paragraph (1) applies even if no moratorium or extension is obtained.
(3) For the purposes of this paragraph, “officer” includes a shadow director.
(4) A person guilty of an offence under this paragraph is liable to imprisonment or a fine, or both.
43 (1) A provision in an instrument creating a floating charge is void if it provides for—
(a) obtaining a moratorium, or
(b) anything done with a view to obtaining a moratorium (including any preliminary decision or investigation),
to be an event causing the floating charge to crystallise or causing restrictions which would not otherwise apply to be imposed on the disposal of property by the company or a ground for the appointment of a receiver.
(2) In sub-paragraph (1), “receiver” includes a manager and a person who is appointed both receiver and manager.
44 (1) This Schedule has effect in relation to a moratorium for a regulated company with the modifications in sub-paragraphs (2) to (16) below.
(2) Any notice or other document required by virtue of this Schedule to be sent to a creditor of a regulated company must also be sent to the Authority.
(3) The Authority is entitled to be heard on any application to the court for leave under paragraph 20(2) or 20(3) (disposal of charged property, etc.).