1 What the draft Order proposes
1. Insolvency proceedings in England and Wales
are mainly governed by the provisions of the Insolvency Act 1986.
Further detail is provided by the Insolvency Rules 1986, which
have subsequently been amended on many occasions.
2. The draft Order is part of a project, which
began in July 2005, to consolidate and modernise the Insolvency
Rules and other relevant provisions. The Department carried out
a consultation exercise in September 2007 for eight proposals.
However, due to "unforeseen issues"[1]
only one proposal is being taken forward at this stage.
3. In light of widespread concerns about existing
insolvency procedure, including the fees structure, and given
the potential volume of changes anticipated from the Insolvency
Service, we are surprised at the narrow focus of the draft Order.
4. The proposal in the draft Order relates to
the initial meetings of creditors in a voluntary liquidation.
The current position is governed by section 95 of the 1986 Act
(for a members' voluntary liquidation, otherwise known as a "solvent"
winding up) or section 98 of the same Act (for a creditors' voluntary
liquidation). In both situations, the liquidator (or the company
itself) is required to advertise the meeting in the Gazette and
in at least two local newspapers.
5. As part of the insolvency procedure, individual
notices are sent to all known creditors, informing them of the
insolvency and giving details of the initial creditors' meeting.
The advertisement provisions are intended to ensure that, if any
other creditors exist, then they are informed of the meeting.
6. Under the terms of the draft Order, the existing
duty to advertise in the Gazette will remain. However, the draft
Order proposes to amend sections 95 and 98 of the 1986 Act by:
- removing the requirement to
advertise in two local newspapers;
- replacing it with a discretion to carry out additional
advertising;
- and, in cases where that discretion is used,
allowing additional advertising in whatever manner the liquidator
or company thinks is appropriate.
1 Explanatory Document (ED) Annex A p2 para 3 Back
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