Small Business, Enterprise and Employment Bill (HC Bill 117)

knowledge of the matter mentioned in subsection (2)(b)) the person
ought 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
5director ought to reach and the steps which the director ought to take
are those which would be known or ascertained, or reached or taken,
by 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
10functions as are carried out by that director in relation to the
company, and

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

(5) The reference in subsection (4) to the functions carried out in relation to
15a company by a director of the company includes any functions which
the director does not carry out but which have been entrusted to the
director.

(6) For the purposes of this section—

(a) a company enters insolvent administration if it enters
20administration at a time when its assets are insufficient for the
payment of its debts and other liabilities and the expenses of the
administration;

(b) a company goes into insolvent liquidation if it goes into
liquidation at a time when its assets are insufficient for the
25payment of its debts and other liabilities and the expenses of the
winding up.

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

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

246ZC Proceedings under section 246ZA or 246ZB

30Section 215 applies for the purposes of an application under section
246ZA or 246ZB as it applies for the purposes of an application under
section 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) 35in 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
mentioned in subsection (2)(b)”, and

(c) 40after 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
liabilities and the expenses of the administration.”

112 45Power for liquidator or administrator to assign causes of action

After section 246ZC of the Insolvency Act 1986 (inserted by section 111)

insert—

“Power to assign certain causes of action

246ZD Power to assign

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

(a) 5the company enters administration, or

(b) the company goes into liquidation;

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

(2) The office-holder may assign a right of action (including the proceeds
10of an action) arising under any of the following—

(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).”

113 Application of proceeds of office-holder claims

20After section 176ZA of the Insolvency Act 1986 insert—

“176ZB Application of proceeds of office-holder claims

(1) This 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
25company which—

(i) is in administration, or

(ii) has gone into liquidation; and

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

(i) 30brought a claim under any provision mentioned in
subsection (3), or

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

(2) 35The proceeds of the claim or assignment (or, in Scotland, assignation)
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) 40The 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) section 239 (preferences (England and Wales));

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

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

(g) section 244 (extortionate credit transactions).

(4) 5Subsection (2) does not apply to a company if or in so far as it is
disapplied 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).”

10Removing requirements to seek sanction

114 Exercise 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) 15The liquidator may exercise any of the powers specified in Parts 1 to 3
of 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
20exercise any of the powers specified in Parts 1 to 3 of Schedule 4.”

(4) In 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) 25In Schedule 4 (powers of liquidator in a winding up)—

(a) in 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.

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

(1) 30The Insolvency Act 1986 is amended as follows.

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

(a) for subsection (1) substitute—

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

(b) 35in subsection (2), omit “With the permission of the creditors’ committee
or the court,”, and

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

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

Position of creditors

116 Abolition of requirements to hold meetings: company insolvency

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

(2) After section 246ZD (as inserted by section 112) insert—

“Decisions by creditors and contributories

246ZE 5 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) The decision may be made by any qualifying decision procedure P
10thinks 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 one creditor makes a request to P in
writing that the decision be made by a creditors’ meeting or (as the case
may be) a contributories’ meeting.

(4) 15If subsection (3) applies P must summon a creditors’ meeting or (as the
case may be) a contributories’ meeting.

(5) Subsection (2) is subject to any provision of this Act, the rules or any
other legislation, or any order of the court—

(a) requiring a decision to be made, or prohibiting a decision from
20being made, by a particular qualifying decision procedure
(other than a creditors’ meeting or a contributories’ meeting);

(b) permitting or requiring a decision to be made by a creditors’
meeting or a contributories’ meeting.

(6) Section 246ZF provides that in certain cases the deemed consent
25procedure may be used instead of a qualifying decision procedure.

(7) In 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) 30In this section references to creditors include creditors of a particular
class.

(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) 35The deemed consent procedure may be used instead of a qualifying
decision procedure where a company’s creditors or contributories are
to make a decision about any matter, unless—

(a) a decision about the matter is required by virtue of this Act, the
rules, or any other legislation to be made by a qualifying
40decision procedure, or

(b) the court orders that a decision about the matter is to be made
by a qualifying decision procedure.

(2) If the rules provide for a company’s creditors or contributories to make
a decision about the remuneration of any person, they must provide
that the decision is to be made by a qualifying decision procedure.

(3) The deemed consent procedure is that the relevant creditors (other than
5opted-out creditors) or (as the case may be) the relevant contributories
are given notice of—

(a) the 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) 10the 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 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
15(as the case may be) the contributories are to be treated as having made
the proposed decision.

(5) Otherwise—

(a) the creditors or (as the case may be) the contributories are to be
treated as not having made a decision about the matter in
20question, and

(b) if a decision about that matter is again sought from the creditors
or (as the case may be) the contributories, it must be sought
using a qualifying decision procedure.

(a)(a)the creditors or (as the case may be) the contributories are to be
25treated as not having made a decision about the matter in
question, and

(b) if a decision about that matter is again sought from the creditors
or (as the case may be) the contributories, it must be sought
using a qualifying decision procedure.

(6) 30“Relevant creditors” means the creditors who, if the decision were to be
made by a qualifying decision procedure, would be entitled to vote in
the procedure.

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

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

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

(3) 40In Schedule 8 (provisions which may be included in company insolvency
rules), after paragraph 8 insert—

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

(a) prescribing particular procedures by which creditors and
45contributories may make decisions;

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

(2) Provision under sub-paragraph (1) may in particular include
50provision about—

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

(b) the rights of creditors, contributories and others to be given
notice of, and participate in, procedures,

(c) creditors’ and contributories’ rights to vote in procedures,

(d) the period within which any right to participate or vote is to
5be exercised,

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

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

(g) 10the time at which decisions taken by a procedure are to be
treated 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
  15procedure provided for by section 246ZF;”;

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

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

117 Abolition of requirements to hold meetings: individual insolvency

(1) 20The Insolvency Act 1986 is amended as follows.

(2) After section 379 insert—

“Creditors’ decisions

379ZA Creditors’ decisions: general

(1) This section applies where, for the purposes of this Group of Parts, a
person (“P”) seeks a decision from an individual’s creditors about any
25matter.

(2) The decision may be made by any creditors’ decision procedure P
thinks 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
30creditors request in writing that the decision be made by a creditors’
meeting.

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

(5) Subsection (2) is subject to any provision of this Act, the rules or any
other legislation, or any order of the court—

(a) 35requiring a decision to be made, or prohibiting a decision from
being made, by a particular creditors’ decision procedure (other
than a creditors’ meeting);

(b) permitting or requiring a decision to be made by a creditors’
meeting.

(6) 40Section 379ZB provides that in certain cases the deemed consent
procedure may be used instead of a creditors’ decision procedure.

(7) In 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) 5In this section references to creditors include creditors of a particular
class.

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

379ZB 10 Deemed consent procedure

(1) The deemed consent procedure may be used instead of a creditors’
decision procedure where an individual’s creditors are to make a
decision about any matter, unless—

(a) a decision about the matter is required by virtue of this Act, the
15rules or any other legislation to be made by a creditors’ decision
procedure, or

(b) the court orders that a decision about the matter is to be made
by a creditors’ decision procedure.

(2) If the rules provide for an individual’s creditors to make a decision
20about the remuneration of any person, they must provide that the
decision is to be made by a creditors’ decision procedure.

(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) 25the decision 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) If less than the prescribed proportion of the relevant creditors object to
30the proposed decision in accordance with the procedure set out in the
notice, the creditors are to be treated as having made the proposed
decision.

(5) Otherwise—

(a) the creditors are to be treated as not having made a decision
35about the matter in question, and

(b) if a decision about that matter is again sought from the
creditors, it must be sought using a creditors’ decision
procedure.

(6) “Relevant creditors” means the creditors who, if the decision were to be
40made by a creditors’ decision procedure, would be entitled to vote in
the procedure.

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

(8) The rules may make further provision about the deemed consent
45procedure.”

(3) In Schedule 9 (provisions which may be included in individual insolvency

rules), after paragraph 11 insert—

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

(a) prescribing particular procedures by which creditors may
5make decisions;

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

(2) Provision under sub-paragraph (1) may in particular include
10provision about—

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

(b) the rights of creditors and others to be given notice of, and
participate in, procedures,

(c) creditors’ rights to vote in procedures,

(d) 15the period within which any right to participate or vote is to
be exercised,

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

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

(g) 20the 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) after the definition of “the court” insert—

• 25““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
  procedure provided for by section 379ZB;”.

118 30Ability for creditors to opt not to receive certain notices: company insolvency

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

(2) For the italic heading before section 246B substitute—

(3) After section 246B insert—

“246C Creditors’ ability to opt out of receiving certain notices

(1) 35Any provision of the rules which requires an office-holder of a
company to give a notice to creditors of the company does not apply, in
circumstances prescribed by the rules, in relation to opted-out
creditors.

(2) Subsection (1)—

(a) 40does not apply in relation to a notice of a distribution or
proposed distribution to creditors;

(b) is subject to any order of the court requiring a notice to be given
to all creditors (or all creditors of a particular category).

(3) Except as provided by the rules, a creditor may participate and vote in
a qualifying decision procedure or a deemed consent procedure even
though, by virtue of being an opted-out creditor, the creditor does not
receive notice of it.

(4) 5In this section—

• “give” includes deliver, furnish or send;

• “notice” includes any document or information in any other form;

• “office-holder”, in relation to a company, means—

  (a)

  a liquidator, provisional liquidator, administrator or
  10administrative receiver of the company,

  (b)

  a receiver appointed under section 51 in relation to any
  property of the company, or

  (c)

  the supervisor of a voluntary arrangement which has
  taken effect under Part 1 in relation to the company.”

(4) 15After section 248 insert—

“248A Opted-out creditor”

(1) For the purposes of this Group of Parts “opted-out creditor”, in relation
to an office-holder of a company, means a person who—

(a) is a creditor of the company, and

(b) 20in accordance with the rules has elected (or is deemed to have
elected) to be (and not to cease to be) an opted-out creditor in
relation to the office-holder.

(2) In this section, “office-holder”, in relation to a company, means—

(a) a liquidator, provisional liquidator, administrator or
25administrative receiver of the company,

(b) a receiver appointed under section 51 in relation to any
property of the company, or

(c) the supervisor of a voluntary arrangement which has taken
effect under Part 1 in relation to the company.”

(5) 30In Schedule 8 (provisions which may be included in company insolvency
rules), after paragraph 5 insert—

“5A Provision for enabling a creditor of a company to elect to be, or to
cease to be, an opted-out creditor in relation to an office-holder of the
company (within the meaning of section 248A), including, in
35particular, provision—

(a) for requiring an office-holder to provide information to
creditors about how they may elect to be, or cease to be,
opted-out creditors;

(b) for deeming an election to be, or cease to be, an opted-out
40creditor in relation to a particular office-holder of a company
to be such an election also in relation to any other office-
holder of the company.”

119 Ability for creditors to opt not to receive certain notices: individual
insolvency

(1) 45The Insolvency Act 1986 is amended as follows.

(2) For the italic heading before section 379B substitute—

(3) After section 379B insert—

“379C Creditors’ ability to opt out of receiving certain notices

(1) Any provision of the rules which requires an office-holder to give a
5notice to creditors of an individual does not apply, in circumstances
prescribed by the rules, in relation to opted-out creditors.

(2) Subsection (1)—

(a) does not apply in relation to a notice of a distribution or
proposed distribution to creditors;

(b) 10is subject to any order of the court requiring a notice to be given
to all creditors (or all creditors of a particular category).

(3) Except as provided by the rules, a creditor may participate and vote in
a qualifying decision procedure or a deemed consent procedure even
though, by virtue of being an opted-out creditor, the creditor does not
15receive notice of it.

(4) In this section—

• “give” includes deliver, furnish or send;

• “notice” includes any document or information in any other form;

• “office-holder”, in relation to an individual, means—

  (a)

  20where a bankruptcy order is made against the
  individual, the official receiver or the trustee in
  bankruptcy;

  (b)

  where an interim receiver of the individual’s property is
  appointed, the interim receiver;

  (c)

  25the supervisor of a voluntary arrangement approved
  under Part 8 in relation to the individual.”

(4) After section 383 insert—

“383A Opted-out creditor”

(1) For the purposes of this Group of Parts “opted-out creditor” in relation
30to an office-holder for an individual means a person who—

(a) is a creditor of the individual, and

(b) in accordance with the rules has elected (or is deemed to have
elected) to be (and not to cease to be) an opted-out creditor in
relation to the office-holder.

(2) 35In this section, “office-holder”, in relation to an individual, means—

(a) where a bankruptcy order is made against the individual, the
official receiver or the trustee in bankruptcy;

(b) where an interim receiver of the individual’s property is
appointed, the interim receiver;

(c) 40the supervisor of a voluntary arrangement approved under Part
8 in relation to the individual.”

(5) In Schedule 9 (provisions capable of inclusion in individual insolvency rules),