Changes to insolvency rulesPrint publication
The principal insolvency-related changes introduced by the Small Business, Enterprise and Employment Act 2015 (the Act) are:
- liquidators and administrators will be permitted to assign the rights of action in respect of fraudulent trading, wrongful trading, transactions at an undervalue, preferences and extortionate credit transactions. Until now, it has only been possible for office holders to assign causes of action that vested in the company, not personal actions vesting in themselves
- administrators as well as liquidators will be able to bring a claim against directors for fraudulent and wrongful trading
Both of the above require secondary legislation before they come into force and we don’t yet know when that will be. The following, however, will come into effect on 26 May:
- the removal of the requirement for sanction before exercising certain powers in relation to liquidations
- administrators will be able to extend their term in office for up to a year (previously it was six months) by consent, without the need for a court application
- creditors who are owned a “small debt” will no longer have to prove in a corporate insolvency process or bankruptcy in order to participate in a distribution
- a challenge to the approval of ain IVA (on the basis of unfair prejudice or material irregularity) must now be brought within 28 days
- it will no longer be necessary for administrators to obtain the court’s permission before making a payment of the prescribed part only to unsecured creditors
- the abolition of fast-track voluntary arrangements
a requirement for progress reports where a change of liquidator occurs in the first year.
Provisions of the Act that do not yet have a scheduled date for coming into force are:
- the abolition of creditors’ meetings as the primary means of decision-making involving creditors
- the ability of creditors to opt out of receiving certain notices, including the results of decision-making processes, progress reports and receipts and payments accounts
appointment of the Official Receiver as the first trustee in bankruptcy
- additional powers for the Secretary of State to make regulations in respect of sales to connected parties.
The Act is not solely concerned with insolvency law. In particular, it makes a number of changes to UK company, which we have reviewed previously.