Small Business, Enterprise and Employment Bill (HC Bill 11)

(1B) In paragraph (1) “the court” means—

(a) for the purposes of sub-paragraphs (a)(i), (b)(i), (c)(i) and (d)(i)
of paragraph (1A), the High Court,

(b) for the purposes of paragraph (1A)(a)(ii)—

(i) 5the court by which the person was adjudged bankrupt,
or

(ii) in Scotland, the court by which sequestration of the
person’s estate was awarded or, if awarded other than
by the court, the court which would have jurisdiction in
10respect of sequestration of the person’s estate,

(c) for the purposes of paragraph (1A)(b)(ii)—

(i) the court which made the order,

(ii) in Scotland, if the order has been made other than by the
court, the court to which the person may appeal against
15the order, or

(iii) the court to which the person may make an application
for annulment of the undertaking,

(d) for the purposes of paragraph (1A)(c)(ii)—

(i) the court which made the order, or

(ii) 20the court to which the person may make an application
for annulment of the undertaking,

(e) for the purposes of paragraph (1A)(d)(ii), the court to which the
person would make an application under section 251M(1) of the
Insolvency Act 1986 (if the person were dissatisfied as
25mentioned there).”

103 Disqualification as insolvency practitioner: bankruptcy, etc in Scotland or
Northern Ireland

In section 390 of the Insolvency Act 1986 (persons not qualified to act as
insolvency practitioners)—

(a) 30in subsection (4)—

(i) in paragraph (a), after “bankrupt” insert “under this Act or the
Insolvency (Northern Ireland) Order 1989”;

(ii) in paragraph (aa), after “a debt relief order” insert “under this
Act or the Insolvency (Northern Ireland) Order 1989”;

(b) 35for subsection (5) substitute—

“(5) A person is not qualified to act as an insolvency practitioner
while there is in force in respect of that person—

(a) a bankruptcy restrictions order under this Act, the
Bankruptcy (Scotland) Act 1985 or the Insolvency
40(Northern Ireland) Order 1989, or

(b) a debt relief restrictions order under this Act or that
Order.”

104 Disqualification as insolvency practitioner in Northern Ireland: bankruptcy,
etc in England and Wales or Scotland

(1) 45Article 349 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405S.I. 1989/2405
(N.I. 19)) (persons not qualified to act as insolvency practitioners) is amended
as follows.

(2) In paragraph (4)—

(a) in sub-paragraph (a), after “bankrupt” insert “under this Order or the
1986 Act”;

(b)
in sub-paragraph (aa), after “a debt relief order” insert “under this
5Order or the 1986 Act”.

(3) For paragraph (5) substitute—

“(5) A person is not qualified to act as an insolvency practitioner while there
is in force in respect of that person—

(a) a bankruptcy restrictions order under this Order, the 1986 Act
10or the Bankruptcy (Scotland) Act 1985, or

(b) a debt relief restrictions order under this Order or the 1986 Act.

(6) In this Article “the 1986 Act” means the Insolvency Act 1986.”

(4) In consequence of the amendment made by subsection (3), omit—

(a) paragraph 4 of Schedule 6 to the Insolvency (Northern Ireland) Order
152005 (S.I. 2005/1455 (N.I. 10)S.I. 2005/1455 (N.I. 10));

(b) paragraph 4(9)(b) of the Schedule to the Debt Relief Act (Northern
Ireland) 2010 (c. 16 (N.I.)).

Part 10 Insolvency

20Office-holder actions

105 Power for administrator to bring claim for fraudulent or wrongful trading

(1) The Insolvency Act 1986 is amended as follows.

(2) After section 246 insert—

“Administration: penalisation of directors etc

246ZA 25 Fraudulent trading: administration

(1) If while a company is in administration it appears that any business of
the company has been carried on with intent to defraud creditors of the
company or creditors of any other person, or for any fraudulent
purpose, the following has effect.

(2) 30The court, on the application of the administrator, may declare that any
persons who were knowingly parties to the carrying on of the business
in the manner mentioned in subsection (1) are to be liable to make such
contributions (if any) to the company’s assets as the court thinks
proper.

246ZB 35 Wrongful trading: administration

(1) Subject to subsection (3), if while a company is in administration it
appears that subsection (2) applies in relation to a person who is or has
been a director of the company, the court, on the application of the
administrator, may declare that that person is to be liable to make such
40contribution (if any) to the company’s assets as the court thinks proper.

(2) This subsection applies in relation to a person if—

(a) the company has entered insolvent administration,

(b) at some time before the company entered administration, that
person knew or ought to have concluded that there was no
5reasonable prospect that the company would avoid entering
insolvent administration or going into insolvent liquidation,
and

(c) the person was a director of the company at that time.

(3) The court must not make a declaration under this section with respect
10to any person if it is satisfied that, after the condition specified in
subsection (2)(b) was first satisfied in relation to the person, the person
took every step with a view to minimising the potential loss to the
company’s creditors as (on the assumption that the person had
knowledge of the matter mentioned in subsection (2)(b)) the person
15ought to have taken.

(4) For the purposes of subsections (2) and (3), the facts which a director of
a company ought to know or ascertain, the conclusions which the
director ought to reach and the steps which the director ought to take
are those which would be known or ascertained, or reached or taken,
20by a reasonably diligent person having both—

(a) the general knowledge, skill and experience that may
reasonably be expected of a person carrying out the same
functions as are carried out by that director in relation to the
company, and

(b) 25the general knowledge, skill and experience that that director
has.

(5) The reference in subsection (4) to the functions carried out in relation to
a company by a director of the company includes any functions which
the director does not carry out but which have been entrusted to the
30director.

(6) For the purposes of this section—

(a) a company enters insolvent administration if it enters
administration at a time when its assets are insufficient for the
payment of its debts and other liabilities and the expenses of the
35administration;

(b) a company goes into insolvent liquidation if it goes into
liquidation at a time when its assets are insufficient for the
payment of its debts and other liabilities and the expenses of the
winding up.

(7) 40In this section “director” includes shadow director.

(8) This section is without prejudice to section 246ZA.

246ZC Proceedings under section 246ZA or 246ZB

Section 215 applies for the purposes of an application under section
246ZA or 246ZB as it applies for the purposes of an application under
45section 213 but as if the reference in subsection (1) of section 215 to the
liquidator was a reference to the administrator.”

(3) In section 214 (wrongful trading)—

(a) in subsection (2)(b), after “liquidation” insert “or entering insolvent
administration”,

(b) in subsection (3), for the words from “assuming” to “liquidation”
substitute “on the assumption that he had knowledge of the matter
5mentioned in subsection (2)(b)”, and

(c) after subsection (6) insert—

“(6A) For the purposes of this section a company enters insolvent
administration if it enters administration at a time when its
assets are insufficient for the payment of its debts and other
10liabilities and the expenses of the administration.”

106 Power for liquidator or administrator to assign causes of action

After section 246ZC of the Insolvency Act 1986 (inserted by section 105)
insert—

“Assignment of certain causes of action

246ZD 15 Power to assign

(1) This section applies in the case of a company where—

(a) the company enters administration, or

(b) the company goes into liquidation;

and “the office-holder” means the administrator or the liquidator, as
20the case may be.

(2) The office-holder may assign a right of action (including the proceeds
of an action) arising under any of the following—

(a) section 213 or 246ZA (fraudulent trading);

(b) section 214 or 246ZB (wrongful trading);

(c) 25section 238 (transactions at an undervalue (England and
Wales));

(d) section 239 (preferences (England and Wales));

(e) section 242 (gratuitous alienations (Scotland));

(f) section 243 (unfair preferences (Scotland));

(g) 30section 244 (extortionate credit transactions).”

107 Proceeds of office-holder claims not part of general assets of company

After section 176ZA of the Insolvency Act 1986 insert—

“176ZB Proceeds of office-holder claims not part of general assets of
company

(1) 35This section applies where—

(a) there is a floating charge (whether created before or after the
coming into force of this section) which relates to property of a
company which—

(i) is in administration, or

(ii) 40has gone into liquidation; and

(b) the administrator or the liquidator (referred to in this section as
“the office-holder”) has—

(i) brought a claim under any provision mentioned in
subsection (3), or

(ii) made an assignment in relation to a right of action under
any such provision under section 246ZD.

(2) 5The proceeds of the claim or assignment are not to be treated as part of
the company’s net property, that is to say the amount of its property
which would be available for satisfaction of claims of holders of
debentures secured by, or holders of, any floating charge created by the
company.

(3) 10The provisions are—

(a) section 213 or 246ZA (fraudulent trading);

(b) section 214 or 246ZB (wrongful trading);

(c) section 238 (transactions at an undervalue (England and
Wales));

(d) 15section 239 (preferences (England and Wales));

(e) section 242 (gratuitous alienations (Scotland));

(f) section 243 (unfair preferences (Scotland));

(g) section 244 (extortionate credit transactions).

(4) Subsection (2) does not apply to a company if or in so far as it is
20disapplied by—

(a) a voluntary arrangement in respect of the company, or

(b) a compromise or arrangement agreed under Part 26 of the
Companies Act 2006 (arrangements and reconstructions).”

Removing requirements to seek sanction

108 25Exercise of powers by liquidator: removal of need for sanction

(1) The Insolvency Act 1986 is amended as follows.

(2) In section 165 (voluntary winding up: powers of liquidator), for subsections (2)
and (3) substitute—

“(2) The liquidator may exercise any of the powers specified in Parts 1 to 3
30of Schedule 4.”

(3) In section 167 (winding up by the court: powers of liquidator), for subsection
(1) substitute—

“(1) Where a company is being wound up by the court, the liquidator may
exercise any of the powers specified in Parts 1 to 3 of Schedule 4.”

(4) 35In section 169 (supplementary powers (Scotland)), omit subsection (1).

(5) In Part 2 of Schedule 3 (appeals from orders in Scotland: orders which take
effect until matter disposed of by Inner House), omit the entry relating to
orders under section 167 or 169.

(6) In Schedule 4 (powers of liquidator in a winding up)—

(a) 40in paragraph 3, omit “In the case of a winding up in Scotland,”,

(b) omit paragraph 6A, and

(c) omit the headings for each of Parts 1 to 3.

109 Exercise of powers by trustee in bankruptcy: removal of need for sanction

(1) The Insolvency Act 1986 is amended as follows.

(2) In section 314 (bankruptcy: powers of trustee)—

(a) for subsection (1) substitute—

“(1) 5The trustee may exercise any of the powers specified in Parts 1
and 2 of Schedule 5.”,

(b) in subsection (2), omit “With the permission of the creditors’ committee
or the court,”, and

(c) omit subsections (3) and (4).

(3) 10In Schedule 5 (powers of trustee in bankruptcy), omit the headings for each of
Parts 1 to 3.

Position of creditors

110 Abolition of requirements to hold meetings: company insolvency

(1) The Insolvency Act 1986 is amended as follows.

(2) 15After section 246ZD (as inserted by section 106) insert—

“Decisions by creditors and contributories

246ZE Decisions by creditors and contributories: general

(1) This section applies where, for the purposes of this Group of Parts, a
person (“P”) seeks a decision about any matter from a company’s
creditors or contributories.

(2) 20The decision may be made by any qualifying decision procedure P
thinks fit, except that it may not be made by a creditors’ meeting or (as
the case may be) a contributories’ meeting unless subsection (3) applies.

(3) This subsection applies if at least the prescribed proportion of the
creditors or (as the case may be) of the contributories make a request to
25P in writing that the decision be made by a creditors’ meeting or (as the
case may be) a contributories’ meeting.

(4) If subsection (3) applies P must summon a creditors’ meeting or (as the
case may be) a contributories’ meeting.

(5) Subsections (2) and (4) are subject to any provision of the rules, or any
30order of the court, requiring or prohibiting a creditors’ meeting, a
contributories’ meeting or another particular qualifying decision
procedure.

(6) Section 246ZF provides that in certain cases the deemed consent
procedure may be used instead of a qualifying decision procedure.

(7) 35In this section references to a meeting are to a meeting where the
creditors or (as the case may be) contributories are invited to be present
together at the same place (whether or not it is possible to attend the
meeting without being present at that place).

(8) In this section references to creditors include creditors of a particular
40class.

(9) In this Group of Parts “qualifying decision procedure” means a
procedure prescribed or authorised under paragraph 8A of Schedule 8.

246ZF Deemed consent procedure

(1) The deemed consent procedure may be used instead of a qualifying
5decision procedure where a company’s creditors or contributories are
to make a decision in respect of a matter which is not an excluded
matter.

(2) The following are excluded matters—

(a) any matter relating to a proposal for a voluntary arrangement
10under Part 1 (including any matter to be decided by the
creditors under Part 5 of Schedule A1),

(b) any matter relating to the removal of an office-holder,

(c) any matter relating to the remuneration of an office-holder,

(d) any matter prescribed as an excluded matter by the rules,

(e) 15any matter the court orders to be made by a qualifying decision
procedure.

(3) The deemed consent procedure is that the relevant creditors (other than
opted-out creditors) or (as the case may be) the relevant contributories
are given notice of—

(a) 20the matter about which they are to make a decision,

(b) the decision that the person giving the notice proposes should
be made (the “proposed decision”),

(c) the effect of subsections (4) and (5), and

(d) the procedure for objecting to the proposed decision.

(4) 25If less than the prescribed proportion of the relevant creditors or (as the
case may be) the relevant contributories object to the proposed decision
in accordance with the procedure set out in the notice, the creditors or
(as the case may be) the contributories are to be treated as having made
the proposed decision.

(5) 30Otherwise, a decision on the matter in question is to be made by a
qualifying decision procedure.

(6) “Relevant creditors” means the creditors who, if the decision were to be
made by a qualifying decision procedure, would be entitled to
participate in the procedure.

(7) 35“Relevant contributories” means the contributories who, if the decision
were to be made by a qualifying decision procedure, would be entitled
to participate in the procedure.

(8) “Office-holder” means—

(a) a liquidator, provisional liquidator, administrator or
40administrative receiver of the company;

(b) where a voluntary arrangement in relation to the company is
proposed or has taken effect under Part 1, the nominee or the
supervisor of the voluntary arrangement.

(9) In this section references to creditors include creditors of a particular
45class.

(10) The rules may make further provision about the deemed consent
procedure.”

(3) In Schedule 8 (provisions which may be included in company insolvency
rules), after paragraph 8 insert—

“8A (1) 5Provision about the making of decisions by creditors and
contributories, including provision—

(a) prescribing particular procedures by which creditors and
contributories may make decisions;

(b) authorising the use of other procedures for creditors and
10contributories to make decisions, if those procedures comply
with prescribed requirements.

(2) Provision under sub-paragraph (1) may in particular include
provision about—

(a) how creditors and contributories may request that a
15creditors’ meeting or a contributories’ meeting be held,

(b) creditors’ and contributories’ rights to participate in
procedures,

(c) the period within which any right to participate is to be
exercised,

(d) 20the proportion of creditors or contributories that must vote
for a proposal for it to be approved,

(e) how the value of any debt or contribution should be
determined,

(f) the time at which decisions taken by a procedure are to be
25treated as having been made.”

(4) In section 251 (interpretation of first Group of Parts)—

(a) after the definition of “the court” insert—

• ““deemed consent procedure” means the deemed consent
  procedure provided for by section 246ZF;”;

(b) 30after the definition of “prescribed” insert—

• ““qualifying decision procedure” has the meaning given
  by section 246ZE(9);”.

111 Abolition of requirements to hold meetings: individual insolvency

(1) The Insolvency Act 1986 is amended as follows.

(2) 35After section 379 insert—

“Creditors’ decisions

379ZA Creditors’ decisions: general

(1) This section applies where a person (“P”) seeks a decision from a
person’s creditors about any matter.

(2) The decision may be made by any creditors’ decision procedure P
40thinks fit, except that it may not be made by a creditors’ meeting unless
subsection (3) applies.

(3) This subsection applies if at least the prescribed proportion of the
creditors request in writing that the decision be made by a creditors’
meeting.

(4) If subsection (3) applies, P must summon a creditors’ meeting.

(5) 5Subsections (2) and (4) are subject to any provision of the rules, or any
order of the court, requiring or prohibiting a creditors’ meeting or other
particular creditors’ decision procedure.

(6) Section 379ZB provides that in certain cases the deemed consent
procedure may be used instead of a creditors’ decision procedure.

(7) 10In this section references to a meeting are to a meeting where the
creditors are invited to be present together at the same place (whether
or not it is possible to attend the meeting without being present at that
place).

(8) In this section references to creditors include creditors of a particular
15class.

(9) In this Group of Parts “creditors’ decision procedure” means a
procedure prescribed or authorised under paragraph 11A of Schedule
9.

379ZB Deemed consent procedure

(1) 20The deemed consent procedure may be used instead of a creditors’
decision procedure where a person’s creditors are to make a decision
about any matter which is not an excluded matter.

(2) The following are excluded matters—

(a) any matter relating to a proposal for a voluntary arrangement
25under Part 8,

(b) any matter relating to the removal of an office-holder,

(c) any matter relating to the remuneration of an office-holder,

(d) any matter prescribed as an excluded matter by the rules,

(e) any matter the court orders to be made by a creditors’ decision
30procedure.

(3) The deemed consent procedure is that the relevant creditors (other than
opted-out creditors) are given notice of—

(a) the matter about which the creditors are to make a decision,

(b) the decision the person giving the notice proposes should be
35made (the “proposed decision”),

(c) the effect of subsections (4) and (5), and

(d) the procedure for objecting to the proposed decision.

(4) If less than the prescribed proportion of the relevant creditors object to
the proposed decision in accordance with the procedure set out in the
40notice, the creditors are to be treated as having made the proposed
decision.

(5) Otherwise, a decision on the matter in question is to be made by a
creditors’ decision procedure.

(6) “Relevant creditors” means the creditors who, if the decision were to be
made by a creditors’ decision procedure, would be entitled to
participate in the procedure.

(7) “Office-holder” means—

(a) 5a trustee in bankruptcy,

(b) where a voluntary arrangement in relation to the person is
proposed or has taken effect under Part 8, the nominee or the
supervisor of the voluntary arrangement.

(8) In this section references to creditors include creditors of a particular
10class.

(9) The rules may make further provision about the deemed consent
procedure.”

(3) In Schedule 9 (provisions which may be included in individual insolvency
rules), after paragraph 11 insert—

“11A (1) 15Provision about the making of decisions by creditors, including
provision—

(a) prescribing particular procedures by which creditors may
make decisions;

(b) authorising the use of other procedures for creditors to make
20decisions, if those procedures comply with prescribed
requirements.

(2) Provision under sub-paragraph (1) may in particular include
provision about—

(a) how creditors may request that a creditors’ meeting be held,

(b) 25creditors’ rights to participate in procedures,

(c) the period within which any right to participate is to be
exercised,

(d) the proportion of creditors that must vote for a proposal for
it to be approved,

(e) 30how the value of any debt should be determined,

(f) the time at which decisions taken by a procedure are to be
treated as having been made.”

(4) In section 385(1) (miscellaneous definitions relating to individual
insolvency)—

(a) 35after the definition of “the court” insert—

• ““creditors’ decision procedure” has the meaning given by
  section 379ZA(9);”;

(b) after the definition of “debt relief order” insert—

• ““deemed consent procedure” means the deemed consent
  40procedure provided for by section 379ZB;”.

112 Ability for creditors to opt not to receive certain notices: company insolvency

(1) The Insolvency Act 1986 is amended as follows.