Corporate Insolvency and Governance Bill (HC Bill 128)

Corporate Insolvency and Governance BillPage 50

(7) Where the Court makes an order giving permission under
paragraph (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.

(8) If the directors fail to comply with paragraph (7), any director who did
5not have a reasonable excuse for the failure commits an offence.

(9) If a company fails to comply with paragraph (3)

(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.

(10) 10Paragraph (1) does not apply in relation to any property which is
subject to a financial collateral arrangement, a market charge, a system-
charge or a collateral security (as defined by Article 13DI).

13DN Disposal of hire-purchase property

(1) During a moratorium, the company may, with the permission of the
15High Court, dispose of goods which are in the possession of the
company under a hire-purchase agreement as if all the rights of the
owner under the agreement were vested in the company.

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

(3) 20Where the Court gives permission under paragraph (1), the company
must apply the following towards discharging the sums payable under
the hire-purchase agreement—

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

(b) any additional money required to be added to the net proceeds
25so as to produce the amount determined by the Court as the net
amount which would be realised on a sale of the goods in the
open market by a willing vendor.

(4) If a company fails to comply with paragraph (3)

(a) the company commits an offence, and

(b) 30any officer of the company who without reasonable excuse
authorised or permitted the failure commits an offence.

(5) Where the Court makes an order giving permission under
paragraph (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.

(6) 35If the directors fail to comply with paragraph (5), any director who did
not have a reasonable excuse for the failure commits an offence.

Effect of contravention of certain provisions of Chapter
13DO Contravention of certain requirements imposed under this Chapter

The fact that a company contravenes Article 13DA or any of Articles
4013DG to 13DN does not—

(a) make any transaction void or unenforceable, or

(b) affect the validity of any other thing.

Corporate Insolvency and Governance BillPage 51

CHAPTER 5 The monitor

13E Status of monitor

The monitor in relation to a moratorium is an officer of the High Court.

13EA Monitoring

(1) 5During a moratorium, the monitor must monitor the company’s affairs
for the purpose of forming a view as to whether it remains likely that
the moratorium will result in the rescue of the company as a going
concern.

(2) In forming the view mentioned in paragraph (1), the monitor is entitled
10to rely on information provided by the company, unless the monitor
has reason to doubt its accuracy.

13EB Provision of information to monitor

(1) The monitor may require the directors of the company to provide any
information required by the monitor for the purpose of carrying out the
15monitor’s functions.

(2) The directors must comply with a requirement to provide information
as soon as practicable.

(3) For the potential consequences of failing to comply with a requirement
to provide information, see Article 13ED.

13EC 20Application by monitor for directions

The monitor in relation to a moratorium may apply to the High Court
for directions about the carrying out of the monitor’s functions.

13ED Termination of moratorium by monitor

(1) The monitor must bring a moratorium to an end by filing a notice with
25the High Court if—

(a) the monitor thinks that the moratorium is no longer likely to
result in the rescue of the company as a going concern,

(b) the monitor thinks that the objective of rescuing the company as
a going concern has been achieved,

(c) 30the monitor thinks that, by reason of a failure by the directors to
comply with a requirement under Article 13EB, the monitor is
unable properly to carry out the monitor’s functions, or

(d) the monitor thinks that the company is unable to pay any of the
following that have fallen due—

(i) 35moratorium debts;

(ii) pre-moratorium debts for which the company does not
have a payment holiday during the moratorium (see
Article 13D).

(2)
The rules may provide for debts that are to be disregarded for the
40purposes of paragraph (1)(d).

(3) On the filing with the Court of a notice under paragraph (1), the
moratorium comes to an end.

Corporate Insolvency and Governance BillPage 52

(4) The rules may make provision about the timing of a notice required to
be given under paragraph (1).

(5) Regulations may amend this Article for the purposes of changing the
circumstances in which the monitor must bring a moratorium to an end
5under paragraph (1).

(6) Regulations may not be made under paragraph (5) unless a draft of the
regulations has been laid before, and approved by a resolution of, the
Assembly.

(7) See also Article 13CH (obligations to notify change in end of
10moratorium).

13EE Replacement of monitor or appointment of additional monitor

(1) The High Court may make an order authorising the appointment of a
qualified person to act as the monitor in relation to a moratorium
instead of, or in addition to, a person who already acts as the monitor.

(2) 15The High Court may make an order providing that a person ceases to
act as the monitor in relation to a moratorium.

(3) An order under paragraph (1) or (2) may be made on only an
application by the directors or the monitor.

(4) The Court may make an order authorising the appointment of a
20monitor under paragraph (1) only if the person has provided the Court
with a statement that the person—

(a) is a qualified person, and

(b) consents to act as the monitor in relation to the moratorium.

(5) Where it is proposed that more than one person should act as the
25monitor in relation to the moratorium, the statement under paragraph
(4) must specify—

(a) which functions (if any) are to be exercised by the persons
acting jointly, and

(b)
which functions (if any) are to be exercised by any or all of the
30persons.

(6) The rules may make provision about the date on which the statement
under paragraph (4) must be made.

(7) Where the Court makes an order under paragraph (1) or (2) the person
begins to act as the monitor, or ceases to act as the monitor, in relation
35to the moratorium at the time specified in, or determined in accordance
with, the order (“the relevant time”).

(8) As soon as reasonably practicable after the relevant time, the monitor
must notify the following of the effect of the order—

(a) the registrar, and

(b) 40every creditor of the company of whose claim the monitor is
aware.

(9) If the monitor without reasonable excuse fails to comply with
paragraph (8), the monitor commits an offence.

Corporate Insolvency and Governance BillPage 53

13EF Application of Part where two or more persons act as monitor

(1) Where two or more persons act jointly as the monitor—

(a) a reference in this Order to the monitor is a reference to those
persons acting jointly;

(b) 5where an offence of omission is committed by the monitor, each
of the persons appointed to act jointly—

(i) commits the offence, and

(ii) may be proceeded against and punished individually.

(2) Where persons act jointly in respect of only some of the functions of the
10monitor, paragraph (1) applies only in relation to those functions.

(3) Where two or more persons act concurrently as the monitor a reference
in this Order to the monitor is a reference to any of the persons
appointed (or any combination of them).

13EG Presumption of validity

15An act of the monitor is valid in spite of a defect in the monitor’s
appointment or qualification.

CHAPTER 6 Challenges

13F Challenge to monitor’s actions

(1) Any of the persons specified below may apply to the High Court on the
20ground that an act, omission or decision of the monitor during a
moratorium has unfairly harmed the interests of the applicant.

(2) The persons who may apply are—

(a) a creditor, director or member of the company, or

(b) any other person affected by the moratorium.

(3) 25An application under paragraph (1) may be made during the
moratorium or after it has ended.

(4) On an application under paragraph (1) the Court may—

(a) confirm, reverse or modify any act or decision of the monitor,

(b) give the monitor directions, or

(c) 30make such other order as it thinks fit (but may not, under this
sub-paragraph, order the monitor to pay any compensation).

(5) Where an application under paragraph (1) relates to a failure by the
monitor to bring the moratorium to an end under Article 13ED(1), an
order under paragraph (4) may, in particular, bring the moratorium to
35an end and make such consequential provision as the Court thinks fit.

(6) Where an application under paragraph (1) relates to the monitor
bringing a moratorium to an end under Article 13ED(1), an order under
paragraph (4) may, in particular, provide that the moratorium is not to
be taken into account for the purposes of paragraph 2(1)(b) of Schedule
40ZA1 (company not eligible for moratorium if moratorium in force
within previous 12 months).

Corporate Insolvency and Governance BillPage 54

(7) In making an order under paragraph (4) the Court must have regard to
the need to safeguard the interests of persons who have dealt with the
company in good faith and for value.

(8) See also Article 13CH (obligations to notify change in end of
5moratorium).

13FA Challenges to monitor remuneration in insolvency proceedings

(1) The rules may confer on an administrator or liquidator of a company
the right to apply to the High Court on the ground that remuneration
charged by the monitor in relation to a prior moratorium for the
10company was excessive.

(2) Rules under paragraph (1) may (among other things) make provision
as to—

(a) time limits;

(b) disposals available to the Court;

(c) 15the treatment of costs of the application in the administration or
winding up.

13FB Challenge to directors’ actions

(1) A creditor or member of a company may apply to the High Court for
an order under this Article on the ground that—

(a) 20during a moratorium, the company’s affairs, business and
property are being or have been managed by the directors in a
manner which has unfairly harmed the interests of its creditors
or members generally or of some part of its creditors or
members (including at least the applicant), or

(b) 25any actual or proposed act or omission of the directors during a
moratorium causes or would cause such harm.

(2) An application under paragraph (1) may be made during the
moratorium or after it has ended.

(3) On an application under paragraph (1) the Court may make such order
30as it thinks fit.

(4) An order under paragraph (3) 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) 35require the directors to refrain from doing or continuing an act
complained of by the applicant or to do an act which the
applicant has complained they have omitted to do,

(c) require the summoning of a meeting of the company’s creditors
for the purpose of considering such matters as the Court may
40direct, or

(d) bring the moratorium to an end and make such consequential
provision as the Court thinks fit.

(5) In making an order under paragraph (3) the Court must have regard to
the need to safeguard the interests of persons who have dealt with the
45company in good faith and for value.

Corporate Insolvency and Governance BillPage 55

(6) See also Article 13CH (obligations to notify change in end of
moratorium).

CHAPTER 7 Offences: general

13G Offence of fraud etc during or in anticipation of moratorium

(1) 5An officer of a company commits an offence if, during a moratorium for
the company or at any time within the period of 12 months ending with
the day on which a moratorium for the company comes into force, the
officer—

(a) does any of the things mentioned in paragraph (2), or

(b) 10was privy to the doing by others of any of the things mentioned
in paragraph (2)(c), (d) and (e).

(2) 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
15company,

(b) fraudulently removing any part of the company’s property to
the value of £500 or more,

(c) concealing, destroying, mutilating or falsifying any document
affecting or relating to the company’s property or affairs,

(d) 20making any false entry in any document affecting or relating to
the company’s property or affairs,

(e) fraudulently parting with, altering or making any omission in
any document affecting or relating to the company’s property
or affairs, or

(f) 25pawning, 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).

(3) It is a defence—

(a) 30for a person charged with an offence under paragraph (1) in
respect of any of the things mentioned in paragraph (2)(a) or (f)
to prove that the person had no intent to defraud, and

(b) for a person charged with an offence under paragraph (1) in
respect of any of the things mentioned in paragraph (2)(c) or (d)
35to prove that the person had no intent to conceal the state of
affairs of the company or to defeat the law.

(4) Where a person pawns, pledges or disposes of any property of a
company in circumstances which amount to an offence under
paragraph (1), every person who takes in pawn or pledge, or otherwise
40receives, the property commits an offence if the person knows it to be
pawned, pledged or disposed of in circumstances which—

(a) amount to an offence under paragraph (1), or

(b) would, if a moratorium were obtained for the company within
the period of 12 months beginning with the day on which the
45pawning, pledging or disposal took place, amount to an offence
under paragraph (1).

Corporate Insolvency and Governance BillPage 56

(5) In this Article, “officer” includes a shadow director.

13GA Offence of false representation etc to obtain a moratorium

(1) An officer of a company commits an offence if, for the purpose of
obtaining a moratorium for the company or an extension of a
5moratorium for the company, the officer—

(a) makes any false representation, or

(b) fraudulently does, or omits to do, anything.

(2) Paragraph (1) applies even if no moratorium or extension is obtained.

(3) In this Article, “officer” includes a shadow director.

13GB 10Prosecution of delinquent officers of company

(1) This Article applies where a moratorium has been obtained for a
company.

(2) If it appears to the monitor that any past or present officer of the
company has committed an offence in connection with the moratorium,
15the monitor must forthwith—

(a) report the matter to the Department, and

(b) provide the Department with such information and give it such
access to and facilities for inspecting and taking copies of
documents (being information or documents in the possession
20or under the control of the monitor and relating to the matter in
question) as it requires.

(3) Where a matter is reported to the Department under paragraph (2), the
Department may, for the purpose of investigating the matter and such
other matters relating to the affairs of the company as appear to the
25Department to require investigation, exercise any of the powers which
are exercisable by inspectors appointed under section 431 or 432 of the
Companies Act 1985.

(4) For the purpose of such an investigation any obligation imposed on a
person by any provision of the Companies Acts to produce documents
30or give information to, or otherwise to assist, inspectors so appointed is
to be regarded as an obligation similarly to assist the Department in its
investigation.

(5) Where a question is put to a person in exercise of the powers conferred
by paragraph (3), the person’s answer may be used in evidence against
35them.

(6) However, in criminal proceedings in which the person is charged with
an offence other than a false statement offence—

(a) no evidence relating to the answer may be adduced, and

(b) no question relating to it may be asked,

40by or on behalf of the prosecution, unless evidence relating to it is
adduced, or a question relating to it is asked, in the proceedings by or
on behalf of the person.

(7) In paragraph (6) “false statement offence” means an offence under
Article 7 or 10 of the Perjury (Northern Ireland) Order 1979 (S.I. 1979/
451714 (N.I. 19)) (false statements made on oath otherwise than in judicial
proceedings or made otherwise than on oath).

Corporate Insolvency and Governance BillPage 57

(8) Where the Director of Public Prosecutions for Northern Ireland
institutes criminal proceedings following any report under
paragraph (2), the monitor, and every officer and agent of the company
past and present (other than the defendant), must give the Director all
5assistance in connection with the prosecution which they are
reasonably able to give.

(9) For this purpose “agent” includes any banker or solicitor of the
company and any person employed by the company as auditor,
whether that person is or is not an officer of the company.

(10) 10The High Court may, on the application of the Director of Public
Prosecutions for Northern Ireland, direct a person who has failed to
comply with paragraph (8) to comply with it.

CHAPTER 8 Miscellaneous and general

Special rules for certain kinds of company
13H 15Regulated companies: modifications to this Part

(1) For the purposes of Articles 13B and 13BA as they apply in relation to
a regulated company, Article 13BC(1) has effect as if the documents
listed there included a reference to the written consent of the
appropriate regulator to the appointment of the proposed monitor.

(2) 20The remaining provisions of this Article apply in relation to a
moratorium for a regulated company.

(3) Any notice under Article 13BE(2), 13CH(2) to (4) or 13EE(8) must also
be sent by the monitor to the appropriate regulator.

(4) The directors must give the appropriate regulator notice of any meeting
25of the company’s creditors that is to be held for the purposes of Article
13CC(2) or 13FB(4)(c).

(5) If the directors fail to comply with paragraph (4), any director who did
not have a reasonable excuse for the failure commits an offence.

(6) The appropriate regulator, or a person appointed by the appropriate
30regulator, may in the way provided for by the rules, participate (but not
vote) in any meeting of the company’s creditors that is held for the
purposes of this Part.

(7) The appropriate regulator is entitled to be heard on any application to
the High Court for permission under Article 13DM(1) or 13DN(1)
35(disposal of charged property, etc.).

(8) The High Court may make an order under Article 13EE(1) only if the
appropriate regulator has given its written consent to the appointment
of the proposed monitor.

(9) The persons who may apply to the High Court under Article 13EE(3), 13F(1) or 13FB(1) include the appropriate regulator.

Corporate Insolvency and Governance BillPage 58

(10) If a person other than a regulator applies to the High Court under
Article 13EE(3), 13F(1) or 13FB(1) the appropriate regulator is entitled
to be heard on the application.

(11) If either regulator makes an application to the High Court under Article
513EE(3), 13F(1) or 13FB(1) in relation to a PRA-regulated company, the
other regulator is entitled to be heard on the application.

(12) This Article does not affect any right that the appropriate regulator has
(apart from this Article) as a creditor of a regulated company.

(13) In this Article—

  • 10“the appropriate regulator” means—

    (a)

    where the regulated company is a PRA-regulated
    company, each of the Financial Conduct Authority and
    the Prudential Regulation Authority, and

    (b)

    where the regulated company is not a PRA-regulated
    15company, the Financial Conduct Authority;

  • “PRA-authorised person” has the meaning given by section 2B(5)
    of the Financial Services and Markets Act 2000;

  • “PRA-regulated company” means a regulated company which—

    (a)

    is, or has been, a PRA-authorised person,

    (b)

    20is, or has been, an appointed representative within the
    meaning given by section 39 of the Financial Services
    and Markets Act 2000, whose principal (or one of whose
    principals) is, or was, a PRA-authorised person, or

    (c)

    is carrying on, or has carried on, a PRA-regulated
    25activity (within the meaning of section 22A of that Act)
    in contravention of the general prohibition;

  • “regulated activity” has the meaning given by section 22 of the
    Financial Services and Markets Act 2000, taken with Schedule 2
    to that Act and any order under that section;

  • 30“regulated company” means a company which—

    (a)

    is, or has been, an authorised person within the meaning
    given by section 31 of the Financial Services and
    Markets Act 2000,

    (b)

    is, or has been, an appointed representative within the
    35meaning given by section 39 of that Act, or

    (c)

    is carrying on, or has carried on, a regulated activity in
    contravention of the general prohibition within the
    meaning given by section 19 of that Act;

  • “regulator” means the Financial Conduct Authority or the
    40Prudential Regulation Authority.

(14) Regulations may amend this Article for the purposes of changing the
definition of “regulated company” in paragraph (13).

(15) Regulations may not be made under paragraph (14) unless a draft of the
regulations has been laid before, and approved by a resolution of, the
45Assembly.

13HA Power to modify this Part etc in relation to certain companies

(1) Regulations may—

Corporate Insolvency and Governance BillPage 59

(a) modify this Part as it applies in relation to a company for which
there is a special administration regime, or

(b) make provision in connection with the interaction between this
Part and any other insolvency procedure in relation to such a
5company.

(2) The power in paragraph (1) may, in particular, be used to amend,
repeal, revoke or otherwise modify any statutory provision.

(3) In this Article—

  • “ordinary administration” means the insolvency procedure
    10provided for by Schedule B1;

  • “special administration regime” means provision made by any
    statutory provision for an insolvency procedure that—

    (a)

    is similar or corresponds to ordinary administration,
    and

    (b)

    15provides for the administrator to have one or more
    special objectives instead of or in addition to the
    objectives of ordinary administration.

(4) Regulations may not be made under paragraph (1) unless a draft of the
regulations has been laid before, and approved by a resolution of, the
20Assembly; but this is subject to paragraph (5).

(5) During the period of six months beginning with the day on which
section 4 of the Corporate Insolvency and Governance Act 2020 comes
into operation, provision under paragraph (1) may be made by
regulations that are subject to negative resolution.

25Floating charges
13HB Void provisions in floating charge documents

(1) A provision in an instrument creating a floating charge is void if it
provides for the obtaining of a moratorium, or anything done with a
view to obtaining a moratorium, to be—

(a) 30an event causing the floating charge to crystallise,

(b) an event causing restrictions which would not otherwise apply
to be imposed on the disposal of property by the company, or

(c) a ground for the appointment of a receiver.

(2) The reference in paragraph (1) to anything done with a view to
35obtaining a moratorium includes any preliminary decision or
investigation.

(3) In paragraph (1) “receiver” includes a manager and a person who is
appointed both receiver and manager.

Interpretation of this Part
13HC 40Meaning of “pre-moratorium debt” and “moratorium debt”

(1) In this Part “pre-moratorium debt”, in relation to a company for which
a moratorium is or has been in force, means—

(a) any debt or other liability to which the company becomes
subject before the moratorium comes into force, or