Small Business, Enterprise and Employment Bill (HL Bill 57)

(2) After Article 10 insert—

“10A Office-holder’s report on conduct of directors

(1) The office-holder in respect of a company which is insolvent must
prepare a report (a “conduct report”) about the conduct of each
5person who was a director of the company—

(a) on the insolvency date, or

(b) at any time during the period of 3 years ending with that
date.

(2) For the purposes of this Article a company is insolvent if—

(a) 10the company is in liquidation and at the time it went into
liquidation its assets were insufficient for the payment of its
debts and other liabilities and the expenses of the winding
up,

(b) the company has entered administration, or

(c) 15an administrative receiver of the company has been
appointed;

and paragraph (1A) of Article 9 applies for the purposes of this
Article as it applies for the purposes of that Article.

(3) A conduct report must, in relation to each person, describe any
20conduct of the person which may assist the Department in deciding
whether to exercise the power under Article 10(1) or (3) in relation to
that person.

(4) The office-holder must send the conduct report to the Department
before the end of—

(a) 25the period of 3 months beginning with the insolvency date, or

(b) such other longer period as the Department considers
appropriate in the particular circumstances.

(5) If new information comes to the attention of an office-holder, the
office-holder must send that information to the Department as soon
30as reasonably practicable.

(6) “New information” is information which an office-holder considers
should have been included in a conduct report prepared in relation
to the company, or would have been so included had it been
available before the report was sent.

(7) 35If there is more than one office-holder in respect of a company at any
particular time (because the company is insolvent by virtue of falling
within more than one sub-paragraph of paragraph (2) at that time),
paragraph (1) applies only to the first of the office-holders to be
appointed.

(8) 40In the case of a company which is at different times insolvent by
virtue of falling within one or more different sub-paragraphs of
paragraph (2)—

(a) the references in paragraph (1) to the insolvency date are to
be read as references to the first such date during the period
45in which the company is insolvent, and

(b) paragraph (1) does not apply to an office-holder if at any time
during the period in which the company is insolvent a

conduct report has already been prepared and sent to the
Department.

(9) The “office-holder” in respect of a company which is insolvent is—

(a) in the case of a company being wound up by the High Court,
5the official receiver;

(b) in the case of a company being wound up otherwise, the
liquidator;

(c) in the case of a company in administration, the administrator;

(d) in the case of a company of which there is an administrative
10receiver, the receiver.

(10) The “insolvency date”—

(a) in the case of a company being wound up by the High Court,
means the date on which the Court makes the winding-up
order (see Article 105 of the Insolvency (Northern Ireland)
15Order 1989);

(b) in the case of a company being wound up by way of a
members’ voluntary winding up, means the date on which
the liquidator forms the opinion that the company will be
unable to pay its debts in full (together with interest at the
20official rate) within the period stated in the directors’
declaration of solvency under Article 75 of the Insolvency
(Northern Ireland) Order 1989;

(c) in the case of a company being wound up by way of a
creditors’ voluntary winding up where no such declaration
25under Article 75 of that Order has been made, means the date
of the passing of the resolution for voluntary winding up;

(d) in the case of a company which has entered administration,
means the date the company did so;

(e) in the case of a company in respect of which an
30administrative receiver has been appointed, means the date
of that appointment.

(11) For the purposes of paragraph (10)(e), any appointment of an
administrative receiver to replace an administrative receiver who
has died or vacated office pursuant to Article 55 of the Insolvency
35(Northern Ireland) Order 1989 is to be ignored.

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

(3) In Article 10 (disqualification order or undertaking and reporting
provisions), omit paragraph (4).

(4) For the heading to Article 10 substitute “Disqualification orders under
40Article 9: applications and acceptance of undertakings”.

(5) In consequence of the amendment made by sub-paragraph (3), omit
paragraph 64 of Schedule 2 to the Insolvency (Northern Ireland) Order 2005
(S.I. 2005/1455 (N.I. 10)S.I. 2005/1455 (N.I. 10)).

Directors: removal of restriction on application for disqualification order

6 (1) 45The 2002 Order is amended as follows.

(2) In Article 11 (disqualification of director after investigation of company)—

(b) omit paragraph (2), and

(c) in paragraph (3), omit “from such report, information or documents”.

(3) For the heading of that Article substitute “Disqualification of director on
finding of unfitness”.

5Persons instructing unfit director

7 After Article 11 of the 2002 Order insert—

“Persons instructing unfit directors

11A Order disqualifying person instructing unfit director of insolvent
company

(1) The High Court may make a disqualification order against a person
10(“P”) if, on an application under Article 11B, it is satisfied—

(a) either—

(i) that a disqualification order under Article 9 has been
made against a person who is or has been a director
(but not a shadow director) of a company, or

(ii) 15that the Department has accepted a disqualification
undertaking from such a person under Article 10(3),
and

(b) that P exercised the requisite amount of influence over the
person.

20That person is referred to in this Article as “the main transgressor”.

(2) For the purposes of this Article, P exercised the requisite amount of
influence over the main transgressor if any of the conduct—

(a) for which the main transgressor is subject to the order made
under Article 9, or

(b) 25in relation to which the undertaking was accepted from the
main transgressor under Article 10(3),

was the result of the main transgressor acting in accordance with P’s
directions or instructions.

(3) But P does not exercise the requisite amount of influence over the
30main transgressor by reason only that the main transgressor acts on
advice given by P in a professional capacity.

(4) Under this Article the minimum period of disqualification is 2 years
and the maximum period is 15 years.

11B Application for order under Article 11A

(1) 35If it appears to the Department that it is expedient in the public
interest that a disqualification order should be made against a person
under Article 11A, the Department may—

(a) make an application to the High Court for such an order, or

(b) in a case where an application for an order under Article 9
40against the main transgressor has been made by the official
receiver, direct the official receiver to make such an
application.

(2) Except with the leave of the High Court, an application for a
disqualification order under Article 11A must not be made after the
end of the period of 3 years beginning with the day on which the
company in question became insolvent (within the meaning given by
5Article 9(2)).

(3) Paragraph (5) of Article 10 applies for the purposes of this Article as
it applies for the purposes of that Article.

11C Disqualification undertaking instead of an order under Article 11A

(1) If it appears to the Department that it is expedient in the public
10interest to do so, the Department may accept a disqualification
undertaking from a person (“P”) if—

(a) any of the following is the case—

(i) a disqualification order under Article 9 has been
made against a person who is or has been a director
15(but not a shadow director) of a company,

(ii) the Department has accepted a disqualification
undertaking from such a person under Article 10(3),
or

(iii) it appears to the Department that such an
20undertaking could be accepted from such a person (if
one were offered), and

(b) it appears to the Department that P exercised the requisite
amount of influence over the person.

That person is referred to in this Article as “the main transgressor”.

(2) 25For the purposes of this Article, P exercised the requisite amount of
influence over the main transgressor if any of the conduct—

(a) for which the main transgressor is subject to the
disqualification order made under Article 9,

(b) in relation to which the disqualification undertaking was
30accepted from the main transgressor under Article 10(3), or

(c) which led the Department to the conclusion set out in
paragraph (1)(a)(iii),

was the result of the main transgressor acting in accordance with P’s
directions or instructions.

(3) 35But P does not exercise the requisite amount of influence over the
main transgressor by reason only that the main transgressor acts on
advice given by P in a professional capacity.

(4) Paragraph (5) of Article 10 applies for the purposes of this Article as
it applies for the purposes of that Article.

11D 40Order disqualifying person instructing unfit director: other cases

(1) The High Court may make a disqualification order against a person
(“P”) if, on an application under this Article, it is satisfied—

(a) either—

(i) that a disqualification order under Article 11 has been
45made against a person who is or has been a director
(but not a shadow director) of a company, or

(ii) that the Department has accepted a disqualification
undertaking from such a person under Article 11(3),
and

(b) that P exercised the requisite amount of influence over the
5person.

That person is referred to in this Article as “the main transgressor”.

(2) The Department may make an application to the High Court for a
disqualification order against P under this Article if it appears to the
Department that it is expedient in the public interest for such an
10order to be made.

(3) For the purposes of this Article, P exercised the requisite amount of
influence over the main transgressor if any of the conduct—

(a) for which the main transgressor is subject to the order made
under Article 11, or

(b) 15in relation to which the undertaking was accepted from the
main transgressor under Article 11(3),

was the result of the main transgressor acting in accordance with P’s
directions or instructions.

(4) But P does not exercise the requisite amount of influence over the
20main transgressor by reason only that the main transgressor acts on
advice given by P in a professional capacity.

(5) Under this Article the maximum period of disqualification is 15
years.

11E Disqualification undertaking instead of an order under Article 11D

(1) 25If it appears to the Department that it is expedient in the public
interest to do so, the Department may accept a disqualification
undertaking from a person (“P”) if—

(a) any of the following is the case—

(i) a disqualification order under Article 11 has been
30made against a person who is or has been a director
(but not a shadow director) of a company,

(ii) the Department has accepted a disqualification
undertaking from such a person under Article 11(3),
or

(iii) 35it appears to the Department that such an
undertaking could be accepted from such a person (if
one were offered), and

(b) it appears to the Department that P exercised the requisite
amount of influence over the person.

40That person is referred to in this Article as “the main transgressor”.

(2) For the purposes of this Article, P exercised the requisite amount of
influence over the main transgressor if any of the conduct—

(a) for which the main transgressor is subject to the
disqualification order made under Article 11,

(b) 45in relation to which the disqualification undertaking was
accepted from the main transgressor under Article 11(3), or

(c) which led the Department to the conclusion set out in
paragraph (1)(a)(iii),

was the result of the main transgressor acting in accordance with P’s
directions or instructions.

(3) But P does not exercise the requisite amount of influence over the
main transgressor by reason only that the main transgressor acts on
5advice given by P in a professional capacity.”

Compensation orders and undertakings

8 After Article 19 of the 2002 Order insert—

“Compensation orders and undertakings

19A Compensation orders and undertakings

(1) 10The High Court may make a compensation order against a person on
the application of the Department if the Court is satisfied that the
conditions mentioned in paragraph (3) are met.

(2) If it appears to the Department that the conditions mentioned in
paragraph (3) are met in respect of a person who has offered to give
15the Department a compensation undertaking, the Department may
accept the undertaking instead of applying, or proceeding with an
application, for a compensation order.

(3) The conditions are that—

(a) the person is subject to a disqualification order or
20disqualification undertaking under this Order, and

(b) conduct for which the person is subject to the order or
undertaking has caused loss to one or more creditors of an
insolvent company of which the person has at any time been
a director.

(4) 25An “insolvent company” is a company that is or has been insolvent
and a company becomes insolvent if—

(a) the company 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,

(b) 30the company enters administration, or

(c) an administrative receiver of the company is appointed.

(5) The Department may apply for a compensation order at any time
before the end of the period of two years beginning with the date on
which the disqualification order referred to in paragraph (3)(a) was
35made, or the disqualification undertaking referred to in that
paragraph was accepted.

(6) In the case of a person subject to a disqualification order under
Article 11A or 11D, or a disqualification undertaking under Article
11C or 11E, the reference in paragraph (3)(b) to conduct is a reference
40to the conduct of the main transgressor in relation to which the
person has exercised the requisite amount of influence.

19B Amounts payable under compensation orders and undertakings

(1) A compensation order is an order requiring the person against
whom it is made to pay an amount specified in the order—

(a) to the Department for the benefit of—

(i) a creditor or creditors specified in the order;

(ii) a class or classes of creditor so specified;

(b) as a contribution to the assets of a company so specified.

(2) 5A compensation undertaking is an undertaking to pay an amount
specified in the undertaking—

(a) to the Department for the benefit of—

(i) a creditor or creditors specified in the undertaking;

(ii) a class or classes of creditor so specified;

(b) 10as a contribution to the assets of a company so specified.

(3) When specifying an amount the High Court (in the case of an order)
and the Department (in the case of an undertaking) must in
particular have regard to—

(a) the amount of the loss caused;

(b) 15the nature of the conduct mentioned in Article 19A(3)(b);

(c) whether the person has made any other financial
contribution in recompense for the conduct (whether under a
statutory provision or otherwise).

(4) An amount payable by virtue of paragraph (2) under a compensation
20undertaking is recoverable as if payable under a court order.

(5) An amount payable under a compensation order or compensation
undertaking is provable as a bankruptcy debt.

19C Variation and revocation of compensation undertakings

(1) The High Court may, on the application of a person who is subject to
25a compensation undertaking—

(a) reduce the amount payable under the undertaking, or

(b) provide for the undertaking not to have effect.

(2) On the hearing of an application under paragraph (1), the
Department must appear and call the attention of the Court to any
30matters which the Department considers relevant, and may give
evidence or call witnesses.”

Amendments consequential on, or related to, amendments made by paragraphs 2 to 8

9 (1) The 2002 Order is amended as follows.

(2) In Article 2(2) (interpretation), after the definition of “the official receiver”
35insert—

• ““overseas company” is a company which is incorporated or formed
  outside Northern Ireland;”.

(3) In Article 3 (disqualification orders: general), in paragraph (2), for “Article
9” substitute “Articles 9 and 11A”.

(4) 40In Article 4 (disqualification undertakings: general)—

(a) in paragraph (1), for “10 and 11” substitute “8A, 10, 11, 11C and 11E”,
and

(b) in paragraph (2), after “10” insert “or 11C”.

(5) In Article 5 (disqualification on conviction of offence punishable only on
indictment or either on indictment or summary conviction), after paragraph
(1) insert—

“(1A) In paragraph (1), “company” includes overseas company.”

(6) 5In Article 6 (disqualification for persistent default under companies
legislation), after paragraph (3A) insert—

“(3B) In this Article “company” includes overseas company.”

(7) In Article 8 (disqualification on summary conviction of offence), after
paragraph (4A) insert—

“(4B) 10In this Article “company” includes overseas company.”

(8) In Article 9 (duty of High Court to disqualify unfit directors of insolvent
companies), in paragraph (2), omit “and Article 10”.

(9) In Article 10 (disqualifications under Article 9: applications and
undertakings), after paragraph (5) insert—

“(6) 15Paragraphs (1A) and (2) of Article 9 apply for the purposes of this
Article as they apply for the purposes of that Article.”

(10) Before Article 12 insert—

“Further provision about disqualification undertakings”.

(11) In Article 14 (participation in wrongful trading), after paragraph (2) insert—

“(3) 20In this Article “company” includes overseas company.”

(12) In Article 20 (application for disqualification order), in paragraph (2), after
“any company” insert “or overseas company”.

(13) In Article 22 (register of disqualification orders and undertakings), in
paragraph (3)(a), for “10 or 11” substitute “8A, 10, 11, 11C or 11E”.

(14) 25In Article 23 (admissibility in evidence of statements), in paragraph (1)—

(a) for “9 to 14” substitute “8A to 14, 17A”, and

(b) after “or 19” insert “to 19C”.

(15) In Article 24 (interaction with the Insolvency (Northern Ireland) Order
1989), in paragraphs (1) and (2)—

(a) 30for “9 to 14” substitute “8A to 14, 17A”, and

(b) after “or 19” insert “to 19C”.

(16) In Article 24D (application of Order to building societies), omit paragraph
(4).

(17) Omit Article 24E (application of Order to open-ended investment
35companies).

(18) In Article 25 (application of Order to incorporated friendly societies)—

(a) after paragraph (3) insert—

“(3A) In relation to an incorporated friendly society, this Order
applies as if Articles 11A to 11E were omitted.”, and

(b) 40omit paragraph (4).

(19) In Article 25A (application of Order to registered societies)—

(a) omit paragraph (2)(d),

(b) after paragraph (2)(f) insert—

“(g) Articles 11A to 11E are to be disregarded.”, and

(c) 5omit paragraph (3).

10 Omit paragraph 65 of Schedule 2 to the Insolvency (Northern Ireland) Order
2005 (S.I. 2005/1455 (N.I. 10)S.I. 2005/1455 (N.I. 10)).

Section 123

SCHEDULE 9 Abolition of requirements to hold meetings; opted-out creditors

10Part 1 Company insolvency

Introductory

1 The Insolvency Act 1986 is amended in accordance with this Part of this
Schedule.

15Company voluntary arrangements

2 In section 2(2) (nominee’s report on company’s proposal), for paragraphs
(aa) and (b) substitute—

“(b) whether, in his opinion, the proposal should be considered
by a meeting of the company and by the company’s creditors,
20and

(c) if in his opinion it should, the date on which, and time and
place at which, he proposes a meeting of the company should
be held.”

3 (1) Section 3 (summoning of meetings) is amended as follows.

(2) 25In subsection (1)—

(a) for the words from “that” to “summoned” substitute “under section
2(2) that the proposal should be considered by a meeting of the
company and by the company’s creditors”;

(b) for the words from “directs)” to the end substitute “directs)—

(a) 30summon a meeting of the company to consider the
proposal for the time, date and place proposed in the
report, and

(b) seek a decision from the company’s creditors as to
whether they approve the proposal.”

(3) 35In subsection (2), for the words from “shall” to the end substitute “shall—

(a) summon a meeting of the company to consider the proposal
for such time, date and place as he thinks fit, and

(b) seek a decision from the company’s creditors as to whether
they approve the proposal.”

(4) For subsection (3) substitute—

“(3) A decision of the company’s creditors as to whether they approve
the proposal is to be made by a qualifying decision procedure.

(4) Notice of the qualifying decision procedure must be given to every
5creditor of the company of whose claim and address the person
seeking the decision is aware.”

(5) For the heading substitute “Consideration of proposal”.

4 (1) Section 4 (decisions of meetings) is amended as follows.

(2) For subsection (1) substitute—

“(1) 10This section applies where, under section 3—

(a) a meeting of the company is summoned to consider the
proposed voluntary arrangement, and

(b) the company’s creditors are asked to decide whether to
approve the proposed voluntary arrangement.

(1A) 15The company and its creditors may approve the proposed voluntary
arrangement with or without modifications.”

(3) In subsection (3) for “A meeting so summoned shall not” substitute “Neither
the company nor its creditors may”.

(4) In subsection (4)—

(a) 20for “a meeting so summoned shall not” substitute “neither the
company nor its creditors may”;

(b) omit “the meeting may approve”;

(c) after “such a proposal or modification” insert “may be approved”.

(5) In subsection (5) for “each of the meetings” substitute “the meeting of the
25company and the qualifying decision procedure”.

(6) In subsection (6) for “either” substitute “the company”.

(7) After subsection (6) insert—

“(6A) After the company’s creditors have decided whether to approve the
proposed voluntary arrangement the person who sought the
30decision must—

(a) report the creditors’ decision to the court, and

(b) immediately after reporting to the court, give notice of the
creditors’ decision to such persons as may be prescribed.”

(8) In the heading, for “meetings” substitute “the company and its creditors”.

5 (1) 35Section 4A (approval of arrangement) is amended as follows.

(2) In subsection (2)—

(a) in paragraph (a) for “both meetings summoned under section 3”
substitute “the meeting of the company summoned under section 3
and by the company’s creditors pursuant to that section”;

(b) 40in paragraph (b) for “creditors’ meeting summoned under”
substitute “company’s creditors pursuant to”.