Insolvency Bill [H.L.] - continued        House of Commons

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  S C H E D U L E S
 
 

 
 
 
SCHEDULE 1
 
  MORATORIUM WHERE DIRECTORS PROPOSE VOLUNTARY ARRANGEMENT
 
  AMENDMENTS OF THE INSOLVENCY ACT 1986
     1. The Insolvency Act 1986 is amended as provided in this Schedule.
 
     2. After section 1 there is inserted-
 
 
"Moratorium.     1A. - (1) Where the directors of an eligible company intend to make a proposal for a voluntary arrangement, they may take steps to obtain a moratorium for the company.
 
    (2) The provisions of Schedule A1 to this Act have effect with respect to-
 
 
    (a) companies eligible for a moratorium under this section,
 
    (b) the procedure for obtaining such a moratorium,
 
    (c) the effects of such a moratorium, and
 
    (d) the procedure applicable (in place of sections 2 to 6 and 7) in relation to the approval and implementation of a voluntary arrangement where such a moratorium is or has been in force."
     3. In section 2(1) (procedure where nominee is not the liquidator or administrator), at the end there is added "and the directors do not propose to take steps to obtain a moratorium under section 1A for the company".
 
     4. Before Schedule 1 there is inserted-
 
 
 

 
 
 
"SCHEDULE A1
 
MORATORIUM WHERE DIRECTORS PROPOSE VOLUNTARY ARRANGEMENT
  PART I
  INTRODUCTORY
 
Interpretation
     1. In this Schedule-
 
 
    "the beginning of the moratorium" has the meaning given by paragraph 8(1),
 
    "the date of filing" means the date on which the documents for the time being referred to in paragraph 7(1) are filed or lodged with the court,
 
    "hire-purchase agreement" includes a conditional sale agreement, a chattel leasing agreement and a retention of title agreement,
 
    "market contract" and "market charge" have the meanings given by Part VII of the Companies Act 1989,
 
    "moratorium" means a moratorium under section 1A,
 
    "the nominee" includes any person for the time being carrying out the functions of a nominee under this Schedule,
 
    "the settlement finality regulations" means the Financial Markets and Insolvency (Settlement Finality) Regulations 1999.
 
Eligible companies
     2. - (1) A company is eligible for a moratorium if it meets the requirements of paragraph 3, unless-
 
 
    (a) it is excluded from being eligible by virtue of paragraph 4, or
 
    (b) it falls within sub-paragraph (2).
      (2) A company falls within this sub-paragraph if-
 
 
    (a) it is an insurance company within the meaning of the Insurance Companies Act 1982,
 
    (b) it is an authorised institution or former authorised institution within the meaning of the Banking Act 1987,
 
    (c) it is a party to a market contract or any of its property is subject to a market charge, or
 
    (d) it is a participant (within the meaning of the settlement finality regulations) or any of its property is subject to a collateral security charge (within the meaning of those regulations).
     3. - (1) A company meets the requirements of this paragraph if the qualifying conditions are met-
 
 
    (a) in the year ending with the date of filing, or
 
    (b) in the financial year of the company which ended last before that date.
      (2) For the purposes of sub-paragraph (1)-
 
 
    (a) the qualifying conditions are met by a company in a period if, in that period, it satisfies two or more of the requirements for being a small company specified for the time being in section 247(3) of the Companies Act 1985, and
 
    (b) a company's financial year is to be determined in accordance with that Act.
      (3) Subsections (4), (5) and (6) of section 247 of that Act apply for the purposes of this paragraph as they apply for the purposes of that section.
 
     4. - (1) A company is excluded from being eligible for a moratorium if, on the date of filing-
 
 
    (a) an administration order is in force in relation to the company,
 
    (b) the company is being wound up,
 
    (c) there is an administrative receiver of the company,
 
    (d) a voluntary arrangement has effect in relation to the company,
 
    (e) there is a provisional liquidator of the company,
 
    (f) a moratorium has been in force for the company at any time during the period of 12 months ending with the date of filing and-
 
      (i) no voluntary arrangement had effect at the time at which the moratorium came to an end, or
 
      (ii) a voluntary arrangement which had effect at any time in that period has come to an end prematurely, or
 
    (g) a voluntary arrangement in relation to the company which had effect in pursuance of a proposal under section 1(3) has come to an end prematurely and, during the period of 12 months ending with the date of filing, an order under section 5(3)(a) has been made.
      (2) Sub-paragraph (1)(b) does not apply to a company which, by reason of a winding-up order made after the date of filing, is treated as being wound up on that date.
 
     5. The Secretary of State may by regulations modify the qualifications for eligibility of a company for a moratorium.
 
  PART II
  OBTAINING A MORATORIUM
 
Nominee's statement
     6. - (1) Where the directors of a company wish to obtain a moratorium, they shall submit to the nominee-
 
 
    (a) a document setting out the terms of the proposed voluntary arrangement,
 
    (b) a statement of the company's affairs containing-
 
      (i) such particulars of its creditors and of its debts and other liabilities and of its assets as may be prescribed, and
 
      (ii) such other information as may be prescribed, and
 
    (c) any other information necessary to enable the nominee to comply with sub-paragraph (2) which he requests from them.
      (2) The nominee shall submit to the directors a statement in the prescribed form indicating whether or not, in his opinion-
 
 
    (a) the proposed voluntary arrangement has a reasonable prospect of being approved and implemented,
 
    (b) the company is likely to have sufficient funds available to it during the proposed moratorium to enable it to carry on its business, and
 
    (c) meetings of the company and its creditors should be summoned to consider the proposed voluntary arrangement.
      (3) In forming his opinion on the matters mentioned in sub-paragraph (2), the nominee is entitled to rely on the information submitted to him under sub-paragraph (1) unless he has reason to doubt its accuracy.
 
      (4) The reference in sub-paragraph (2)(b) to the company's business is to that business as the company proposes to carry it on during the moratorium.
 
 
Documents to be submitted to court
     7. - (1) To obtain a moratorium the directors of a company must file (in Scotland, lodge) with the court-
 
 
    (a) a document setting out the terms of the proposed voluntary arrangement,
 
    (b) a statement of the company's affairs containing-
 
      (i) such particulars of its creditors and of its debts and other liabilities and of its assets as may be prescribed, and
 
      (ii) such other information as may be prescribed,
 
    (c) a statement that the company is eligible for a moratorium,
 
    (d) a statement from the nominee that he has given his consent to act, and
 
    (e) a statement from the nominee that, in his opinion-
 
      (i) the proposed voluntary arrangement has a reasonable prospect of being approved and implemented,
 
      (ii) the company is likely to have sufficient funds available to it during the proposed moratorium to enable it to carry on its business, and
 
      (iii) meetings of the company and its creditors should be summoned to consider the proposed voluntary arrangement.
      (2) Each of the statements mentioned in sub-paragraph (1)(b) to (e), except so far as it contains the particulars referred to in paragraph (b)(i), must be in the prescribed form.
 
      (3) The reference in sub-paragraph (1)(e)(ii) to the company's business is to that business as the company proposes to carry it on during the moratorium.
 
      (4) The Secretary of State may by regulations modify the requirements of this paragraph as to the documents required to be filed (in Scotland, lodged) with the court in order to obtain a moratorium.
 
 
Duration of moratorium
     8. - (1) A moratorium comes into force when the documents for the time being referred to in paragraph 7(1) are filed or lodged with the court and references in this Schedule to "the beginning of the moratorium" shall be construed accordingly.
 
      (2) A moratorium ends at the end of the day on which the meetings summoned under paragraph 29(1) are first held (or, if the meetings are held on different days, the later of those days), unless it is extended under paragraph 32.
 
      (3) If either of those meetings has not first met before the end of the period of 28 days beginning with the day on which the moratorium comes into force, the moratorium ends at the end of the day on which those meetings were to be held (or, if those meetings were summoned to be held on different days, the later of those days), unless it is extended under paragraph 32.
 
      (4) If the nominee fails to summon either meeting within the period required by paragraph 29(1), the moratorium ends at the end of the last day of that period.
 
      (5) If the moratorium is extended (or further extended) under paragraph 32, it ends at the end of the day to which it is extended (or further extended).
 
      (6) Sub-paragraphs (2) to (5) do not apply if the moratorium comes to an end before the time concerned by virtue of-
 
 
    (a) paragraph 25(4) (effect of withdrawal by nominee of consent to act),
 
    (b) an order under paragraph 26(3), 27(3) or 40 (challenge of actions of nominee or directors), or
 
    (c) a decision of one or both of the meetings summoned under paragraph 29.
      (7) If the moratorium has not previously come to an end in accordance with sub-paragraphs (2) to (6), it ends at the end of the day on which a decision under paragraph 31 to approve a voluntary arrangement takes effect under paragraph 36.
 
      (8) The Secretary of State may by order increase or reduce the period for the time being specified in sub-paragraph (3).
 
 
Notification of beginning of moratorium
     9. - (1) When a moratorium comes into force, the directors shall notify the nominee of that fact forthwith.
 
      (2) If the directors without reasonable excuse fail to comply with sub-paragraph (1), each of them is liable to imprisonment or a fine, or both.
 
     10. - (1) When a moratorium comes into force, the nominee shall, in accordance with the rules-
 
 
    (a) advertise that fact forthwith, and
 
    (b) notify the registrar of companies, the company and any petitioning creditor of the company of whose claim he is aware of that fact.
      (2) In sub-paragraph (1)(b) "petitioning creditor" means a creditor by whom a winding-up petition has been presented before the beginning of the moratorium, as long as the petition has not been dismissed or withdrawn.
 
      (3) If the nominee without reasonable excuse fails to comply with sub-paragraph (1)(a) or (b), he is liable to a fine.
 
 
Notification of end of moratorium
     11. - (1) When a moratorium comes to an end, the nominee shall, in accordance with the rules-
 
 
    (a) advertise that fact forthwith, and
 
    (b) notify the court, the registrar of companies, the company and any creditor of the company of whose claim he is aware of that fact.
      (2) If the nominee without reasonable excuse fails to comply with sub-paragraph (1)(a) or (b), he is liable to a fine.
 
  PART III
  EFFECTS OF MORATORIUM
 
Effect on creditors, etc.
     12. - (1) During the period for which a moratorium is in force for a company-
 
 
    (a) no petition may be presented for the winding up of the company,
 
    (b) no meeting of the company may be called or requisitioned except with the consent of the nominee or the leave of the court and subject (where the court gives leave) to such terms as the court may impose,
 
    (c) no resolution may be passed or order made for the winding up of the company,
 
    (d) no petition for an administration order in relation to the company may be presented,
 
    (e) no administrative receiver of the company may be appointed,
 
    (f) no landlord or other person to whom rent is payable may exercise any right of forfeiture by peaceable re-entry in relation to premises let to the company in respect of a failure by the company to comply with any term or condition of its tenancy of such premises, except with the leave of the court and subject to such terms as the court may impose,
 
    (g) no other steps may be taken to enforce any security over the company's property, or to repossess goods in the company's possession under any hire-purchase agreement, except with the leave of the court and subject to such terms as the court may impose, and
 
    (h) no other proceedings and no execution or other legal process may be commenced or continued, and no distress may be levied, against the company or its property except with the leave of the court and subject to such terms as the court may impose.
      (2) Where a petition, other than an excepted petition, for the winding up of the company has been presented before the beginning of the moratorium, section 127 shall not apply in relation to any disposition of property, transfer of shares or alteration in status made during the moratorium or at a time mentioned in paragraph 37(5)(a).
 
      (3) In the application of sub-paragraph (1)(h) to Scotland, the reference to execution being commenced or continued includes a reference to diligence being carried out or continued, and the reference to distress being levied is omitted.
 
      (4) Paragraph (a) of sub-paragraph (1) does not apply to an excepted petition and, where such a petition has been presented before the beginning of the moratorium or is presented during the moratorium, paragraphs (b) and (c) of that sub-paragraph do not apply in relation to proceedings on the petition.
 
      (5) For the purposes of this paragraph, "excepted petition" means a petition under-
 
 
    (a) section 124A of this Act,
 
    (b) section 72 of the Financial Services Act 1986 on the ground mentioned in subsection (1)(b) of that section, or
 
    (c) section 92 of the Banking Act 1987 on the ground mentioned in subsection (1)(b) of that section.
 
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