Corporate Insolvency and Governance Bill (HC Bill 128)

(e) provides any collateral security.

(3) Where during the moratorium a company enters into a transaction to
which this section applies, nothing done by or in pursuance of the

Corporate Insolvency and Governance BillPage 17

transaction is to be treated as done in contravention of any of sections
A19, A21, A25, A26 and A28 to A32.

(4) In this section—

  • “collateral security” has the same meaning as in the Financial
    5Markets and Insolvency (Settlement Finality) Regulations 1999
    (S.I. 1999/2979S.I. 1999/2979);

  • “financial collateral arrangement” has the same meaning as in the
    Financial Collateral Arrangements (No. 2) Regulations 2003 (S.I.
    2003/3226);

  • 10“market charge” has the same meaning as in Part 7 of the
    Companies Act 1989;

  • “market contract” has the same meaning as in Part 7 of the
    Companies Act 1989;

  • “system-charge” has the meaning given by the Financial Markets
    15and Insolvency Regulations 1996 (S.I. 1996/1469S.I. 1996/1469);

  • “transfer order” has the same meaning as in the Financial Markets
    and Insolvency (Settlement Finality) Regulations 1999.

Restrictions on payments and disposal of property
A28 Restrictions on payment of certain pre-moratorium debts

(1) 20During a moratorium, the company may make one or more relevant
payments to a person that (in total) exceed the specified maximum
amount only if—

(a) the monitor consents,

(b) the payment is in pursuance of a court order, or

(c) 25the payment is required by section A31(3) or A32(3).

(2) In subsection (1)—

  • “relevant payments” means payments in respect of pre-
    moratorium debts for which the company has a payment
    holiday during the moratorium (see section A18);

  • 30“specified maximum amount” means an amount equal to the
    greater of—

    (a)

    £5000, and

    (b)

    1% of the value of the debts and other liabilities owed by
    the company to its unsecured creditors when the
    35moratorium began, to the extent that the amount of such
    debts and liabilities can be ascertained at that time.

(3) The monitor may give consent under subsection (1)(a) only if the
monitor thinks that it will support the rescue of the company as a going
concern.

(4) 40In deciding whether to give consent under subsection (1)(a), the
monitor is entitled to rely on information provided by the company
unless the monitor has reason to doubt its accuracy.

(5) If the company makes a payment to which subsection (1) applies
otherwise than as authorised by that subsection—

(a) 45the company commits an offence, and

Corporate Insolvency and Governance BillPage 18

(b) any officer of the company who without reasonable excuse
authorised or permitted the payment commits an offence.

A29 Restrictions on disposal of property

(1) During a moratorium, the company may dispose of its property only if
5authorised by subsection (2) or (5).

(2) In the case of property that is not subject to a security interest, the
company may dispose of the property if—

(a) the disposal is made in the ordinary way of the company’s
business,

(b) 10the monitor consents, or

(c) the disposal is in pursuance of a court order.

(3) The monitor may give consent under subsection (2)(b) only if the
monitor thinks that it will support the rescue of the company as a going
concern.

(4) 15In deciding whether to give consent under subsection (2)(b), the
monitor is entitled to rely on information provided by the company
unless the monitor has reason to doubt its accuracy.

(5) In the case of property that is subject to a security interest, the company
may dispose of the property if the disposal is in accordance with—

(a) 20section A31(1), or

(b) the terms of the security.

(6) If the company disposes of its property during the moratorium
otherwise than as authorised by this section—

(a) the company commits an offence, and

(b) 25any officer of the company who without reasonable excuse
authorised or permitted the disposal commits an offence.

A30 Restrictions on disposal of hire-purchase property

(1) During a moratorium, the company may dispose of any goods in the
possession of the company under a hire-purchase agreement only if the
30disposal is in accordance with —

(a) section A32(1), or

(b) the terms of the agreement.

(2) If the company disposes of goods in the possession of the company
under a hire-purchase agreement otherwise than as authorised by
35subsection (1)

(a) the company commits an offence, and

(b) any officer of the company who without reasonable excuse
authorised or permitted the disposal commits an offence.

Disposals of property free from charges etc
A31 40Disposal of charged property free from charge

(1) During a moratorium, the company may, with the permission of the
court, dispose of property which is subject to a security interest as if it
were not subject to the security interest.

Corporate Insolvency and Governance BillPage 19

(2) The court may give permission under subsection (1) only if the court
thinks that it will support the rescue of the company as a going concern.

(3) Where the court gives permission under subsection (1) other than in
relation to a floating charge, the company must apply the following
5towards discharging the sums secured—

(a) the net proceeds of disposal of the property, and

(b) any money required to be added to the net proceeds so as to
produce the amount determined by the court as the net amount
which would be realised on a sale of the property in the open
10market by a willing vendor.

(4) Where the permission relates to two or more security interests, the
condition in subsection (3) requires the application of money in the
order of the priorities of the security interests.

(5) Where property subject to a floating charge is disposed of under
15subsection (1), the holder of the floating charge has the same priority in
respect of acquired property as they had in respect of the property
disposed of.

(6) In subsection (5) “acquired property” means property of the company
which directly or indirectly represents the property disposed of.

(7) 20Where the court makes an order giving permission under
subsection (1), the directors must, within the period of 14 days
beginning with the date of the order, send a copy of it to the registrar of
companies.

(8) If the directors fail to comply with subsection (7), any director who did
25not have a reasonable excuse for the failure commits an offence.

(9) Where property in Scotland is disposed of under subsection (1), the
company must grant to the disponee an appropriate document of
transfer or conveyance of the property, and—

(a) that document, or

(b) 30recording, intimation or registration of that document (where
recording, intimation or registration of the document is a legal
requirement for completion of title to the property),

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

(10) 35If a company fails to comply with subsection (3) or (9)

(a) the company commits an offence, and

(b) any officer of the company who without reasonable excuse
authorised or permitted the failure commits an offence.

(11) Subsection (1) does not apply in relation to any property which is
40subject to a financial collateral arrangement, a market charge, a system-
charge or a collateral security (as defined by section A27).

A32 Disposal of hire-purchase property

(1) During a moratorium, the company may, with the permission of the
court, dispose of goods which are in the possession of the company
45under a hire-purchase agreement as if all the rights of the owner under
the agreement were vested in the company.