Small Business, Enterprise and Employment Bill (HL Bill 91)

which the disqualification order referred to in paragraph (a) of
subsection (3) was made, or the disqualification undertaking referred
to in that paragraph was accepted.

(6) In the case of a person subject to a disqualification order under section
58ZA or 8ZD, or a disqualification undertaking under section 8ZC or
8ZE, the reference in subsection (3)(b) to conduct is a reference to the
conduct of the main transgressor in relation to which the person has
exercised the requisite amount of influence.

(7) In this section and sections 15B and 15C “the court” means—

(a) 10in a case where a disqualification order has been made, the
court that made the order,

(b) in any other case, the High Court or, in Scotland, the Court of
Session.

15B Amounts payable under compensation orders and undertakings

(1) 15A compensation order is an order requiring the person against whom
it is made to pay an amount specified in the order—

(a) to the Secretary of State for the benefit of—

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

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

(b) 20as a contribution to the assets of a company so specified.

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

(a) to the Secretary of State for the benefit of—

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

(ii) 25a class or classes of creditor so specified;

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

(3) When specifying an amount the court (in the case of an order) and the
Secretary of State (in the case of an undertaking) must in particular
have regard to—

(a) 30the amount of the loss caused;

(b) the nature of the conduct mentioned in section 15A(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) 35An amount payable by virtue of subsection (2) under a compensation
undertaking 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.

15C Variation and revocation of compensation undertakings

(1) 40The court may, on the application of a person who is subject to a
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 subsection (1), the Secretary of
45State must appear and call the attention of the court to any matters

which the Secretary of State considers relevant, and may give evidence
or call witnesses.”

Consequential amendments and corresponding provision for Northern Ireland

111 Sections 104 to 110: consequential and related amendments

5Schedule 7 makes amendments to the Company Directors Disqualification Act
1986, and other enactments, which are consequential on or related to the
amendments made to that Act by the preceding provisions of this Part.

112 Provision for Northern Ireland corresponding to sections 104 to 111

Schedule 8 makes provision for Northern Ireland which corresponds to that
10made by sections 104 to 111.

Bankruptcy: Scotland and Northern Ireland

113 Disqualification as director: bankruptcy, etc in Scotland and Northern
Ireland

(1) For subsections (1) and (2) of section 11 of the Company Directors
15Disqualification Act 1986 (undischarged bankrupts) substitute—

“(1) It is an offence for a person to act as director of a company or directly
or indirectly to take part in or be concerned in the promotion, formation
or management of a company, without the leave of the court, at a time
when any of the circumstances mentioned in subsection (2) apply to the
20person.

(2) The circumstances are—

(a) the person is an undischarged bankrupt—

(i) in England and Wales or Scotland, or

(ii) in Northern Ireland,

(b) 25a bankruptcy restrictions order or undertaking is in force in
respect of the person under—

(i) the Bankruptcy (Scotland) Act 1985 or the Insolvency
Act 1986, or

(ii) the Insolvency (Northern Ireland) Order 1989,

(c) 30a debt relief restrictions order or undertaking is in force in
respect of the person under—

(i) the Insolvency Act 1986, or

(ii) the Insolvency (Northern Ireland) Order 1989,

(d) a moratorium period under a debt relief order applies in
35relation to the person under—

(i) the Insolvency Act 1986, or

(ii) the Insolvency (Northern Ireland) Order 1989.

(2A) In subsection (1) “the court” means—

(a) for the purposes of subsection (2)(a)(i)—

(i) 40the 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
respect of sequestration of the person’s estate,

(b) 5for the purposes of subsection (2)(b)(i)—

(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
the order, or

(iii) 10the court to which the person may make an application
for annulment of the undertaking,

(c) for the purposes of subsection (2)(c)(i)—

(i) the court which made the order, or

(ii) the court to which the person may make an application
15for annulment of the undertaking,

(d) for the purposes of subsection (2)(d)(i), 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
mentioned there),

(e) 20for the purposes of paragraphs (a)(ii), (b)(ii), (c)(ii) and (d)(ii) of
subsection (2), the High Court of Northern Ireland.”

(2) In section 24 of that Act (extent), for subsection (2) substitute—

“(2) Subsections (1) to (2A) of section 11 also extend to Northern Ireland.”

114 Company Directors Disqualification (Northern Ireland) Order 2002:
25bankruptcy, etc in England and Wales or Scotland

For paragraph (1) of Article 15 of the Company Directors Disqualification
(Northern Ireland) Order 2002 (S.I. 2002/3150 (N.I. 4)S.I. 2002/3150 (N.I. 4)) (undischarged
bankrupts) substitute—

“(1) It is an offence for a person to act as director of a company or directly
30or indirectly to take part in or be concerned in the promotion, formation
or management of a company, without the leave of the court, at a time
when any of the circumstances mentioned in paragraph (1A) apply to
the person.

(1A) The circumstances are—

(a) 35the person is an undischarged bankrupt—

(i) in Northern Ireland, or

(ii) in England and Wales or Scotland,

(b) a bankruptcy restrictions order or undertaking is in force in
respect of the person under—

(i) 40the Insolvency (Northern Ireland) Order 1989, or

(ii) the Bankruptcy (Scotland) Act 1985 or the Insolvency
Act 1986,

(c) a debt relief restrictions order or undertaking is in force in
respect of the person under—

(i) 45the Insolvency (Northern Ireland) Order 1989, or

(ii) the Insolvency Act 1986,

(d) a moratorium period under a debt relief order applies in
relation to the person under—

(i) the Insolvency (Northern Ireland) Order 1989, or

(ii) the Insolvency Act 1986.

(1B) 5In 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) the court by which the person was adjudged bankrupt,
10or

(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
respect of sequestration of the person’s estate,

(c) 15for 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
the order, or

(iii) 20the 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) the court to which the person may make an application
25for 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
mentioned there).”

115 30Disqualification 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) in subsection (4)—

(i) 35in 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) for subsection (5) substitute—

“(5) 40A 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
(Northern Ireland) Order 1989, or

(b) 45a debt relief restrictions order under this Act or that
Order.”

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

(1) Article 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
5as 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
10Order 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
15or 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
202005 (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

25Office-holder actions

117 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 30 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) 35The 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 40 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
45contribution (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
50reasonable 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
55to 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
60ought 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,
65by 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) 70the 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
75director.

(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
80administration;

(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) 85In 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
90section 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”
5substitute “on the assumption that he had knowledge of the matter
mentioned 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
10assets are insufficient for the payment of its debts and other
liabilities and the expenses of the administration.”

118 Power for liquidator or administrator to assign causes of action

After section 246ZC of the Insolvency Act 1986 (inserted by section 117)
insert—

15“Power to assign certain causes of action

246ZD 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;

20and “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
of an action) arising under any of the following—

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

(b) 25section 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) 30section 243 (unfair preferences (Scotland));

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

119 Application of proceeds of office-holder claims

After section 176ZA of the Insolvency Act 1986 insert—

“176ZB Application of proceeds of office-holder claims

(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) 5has 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) 10made an assignment (or, in Scotland, assignation) in
relation to a right of action under any such provision
under section 246ZD.

(2) The 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
15the 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) The provisions are—

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

(b) 20section 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) 25section 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
disapplied by—

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

(b) 30a compromise or arrangement agreed under Part 26 of the
Companies Act 2006 (arrangements and reconstructions).”

Removing requirements to seek sanction

120 Exercise of powers by liquidator: removal of need for sanction

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

(2) 35In 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
of Schedule 4.”

(3) In section 167 (winding up by the court: powers of liquidator), for subsection
40(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) 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) In Schedule 4 (powers of liquidator in a winding up)—

(a) 5in 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.

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

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

(2) 10In 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) in subsection (2), omit “With the permission of the creditors’ committee
15or 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

122 20Abolition of requirements to hold meetings: company insolvency

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

(2) After section 246ZD (as inserted by section 118) 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
25person (“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
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) 30This subsection applies if at least the prescribed proportion of the
creditors or (as the case may be) of the contributories make 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) If subsection (3) applies P must summon a creditors’ meeting or (as the
35case 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
being 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’
5meeting or a contributories’ meeting.

(6) Section 246ZF provides that in certain cases the deemed consent
procedure 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
10together 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
class.

(9) In this Group of Parts “qualifying decision procedure” means a
15procedure 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
decision procedure where a company’s creditors or contributories are
to make a decision about any matter, unless—

(a) 20a decision about the matter is required by virtue of this Act, the
rules, or any other legislation to be made by a qualifying
decision procedure, or

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

(2) 25If 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
opted-out creditors) or (as the case may be) the relevant contributories
30are 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) the effect of subsections (4) and (5), and

(d) 35the 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
(as the case may be) the contributories are to be treated as having made
40the 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
question, and

(b) 45if 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
treated as not having made a decision about the matter in
50question, 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.