The Small Business, Enterprise and Employment Act 2015 (SEEBA) and the Deregulation Act 2015 were added to the statute book on 26 March. Both contain provisions that make significant changes to the Insolvency Act 1986.
On 26 May, a host of measures came into force aimed at tidying up procedural issues. The remaining provisions of SEEBA that affect the Insolvency Act 1986 require secondary legislation to bring them into force. They are likely to come into play next year with the new Insolvency Rules 2015 (presently expected in April 2016).
The "red tape" changes as of 26 May 2015
Deregulation Act 2015
- The “Minmar” problem of how to give notice of out-of-court administration appointments where there is no holder of a qualifying floating charge is addressed by Schedule 6(2) paragraphs 4 & 5 of the Deregulation Act 2015. In Re Minmar (929) Ltd  EWHC 1159 (Ch) the High Court ruled that the appointment of an administrator would be invalid if it was made out of court by directors and no notice of intention to appoint had been served on the company. However, from 26 May 2015, the appointment of an administrator by directors or the company under paragraph 22 of Schedule B1 to the Insolvency Act 1986 has been expressly permitted where a winding-up petition has been presented after a notice of intention to appoint an administrator is filed at court.
Small Business, Enterprise and Employment Act 2015
- A power now exists to make rules so that a creditor owed a small debt no longer needs to prove formally in the insolvency process in order to participate in it and receive a distribution. It is anticipated that a “small debt” will refer to any sum less than £1,000 – paragraph 13A, Schedule 8 (corporate insolvency) and paragraph 18A, Schedule 9 (bankruptcy), IA 1986, as amended by sections 131-132 of SBEEA 2015.
- Fast track IVAs have been abolished – section 135, SBEEA 2015.
- The creditors of a company in administration are now able to agree to extend the company’s administration for a period of up to 12 months without the administrator having to apply to court – paragraph 76(2)(b), Schedule B1 of the Insolvency Act 1986, as amended by section 127 SBEEA 2015.
- A liquidator no longer needs to obtain the permission of the court or creditors to exercise his powers set out in Schedule 4 to the Insolvency Act. The previous inconsistency where different sanctions were required in compulsory liquidations and voluntary liquidations is gone – sections 165 and 167 (liquidation) and section 214 (bankruptcy) of the Insolvency Act 1986, as amended by sections 120-121 of SBEEA 2015.
- An administrator no longer needs to apply to court for permission to distribute the prescribed part – paragraph 65(3), Schedule B1 of the Insolvency Act 1986, as amended by section 128 of SBEEA 2015.
- As such, an administrator may no longer end an administration by moving a company into a creditors’ voluntary liquidation (CVL) if the only funds available for unsecured creditors lie in the prescribed part – paragraph 83, Schedule B1 of the Insolvency Act 1986.
- Any challenge of the approval of an individual voluntary arrangement (IVA) must now be brought within 28 days of the meeting called to consider the IVA proposal – section 262(3)(a) of the Insolvency Act 1986, as amended by sections 131-132 of SBEEA 2015.
- A progress report must be issued by in a voluntary liquidation even if the liquidator changes in the first year - s136 of SEEBA 2015.
Substantive new law to come
- Where an office-holder seeks a decision from creditors (or contributories), it will no longer be necessary to hold a meeting of creditors. Instead the concept of “deemed consent” is to be introduced, whereby the office holder circulates details of their proposed decision, and the decision is deemed consented to unless more than 10% by value or number of creditors, or just 10 creditors, object and request a meeting. Where meetings are specifically required by statute, they will not be abolished.
- Liquidators and administrators are to be permitted to assign their rights to certain claims, including for wrongful trading, fraudulent trading, transactions at an undervalue and preferences.
- Administrators are to have the same power as liquidators to bring wrongful trading and fraudulent trading claims.
- The Secretary of State is to be entitled to take direct action against insolvency practitioners who fail to meet professional standards.
This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole.