The following changes have taken effect in relation to bankruptcy;
Reduce the number of restrictions that are automatically imposed on undischarged bankrupts and provide for the automatic discharge of nearly all bankrupts after a maximum of 12 months.
Introduce Bankruptcy Restrictions Orders (BROs) to protect the public and the commercial community from bankrupts whose conduct before and during bankruptcy has been found to be culpable.
Introduce Income Payments Agreements (IPA) as an administrative alternative to court-based Income Payments Orders (IPO). IPAs will carry the same conditions as IPOs and both will be able to run for a period of up to three years.
Enable the Official Receiver (OR) to act as nominee and supervisor of new fast-track IVAs begun after bankruptcy order has been made.
Require the Official Receiver to investigate why a bankrupt failed only where he thinks that this is necessary.
Limit to three years the period in which a trustee may deal with a bankrupt's interest in the sole or principal home of the bankrupt, the bankrupt's spouse or a former spouse before that interest revert to the bankrupt.
Streamline the procedure of administration to make it more efficient and accessible in order to facilitate the rescue of viable companies, and, if this is not reasonably practicable, one of the other two objectives provided for.
Restrict the ability to appoint an administrative receiver to lenders who hold pre-existing floating charges, or who are financiers involved in certain capital market and other transactions where they must be able to appoint an administrative receiver if the market is to operate effectively.
Introduce powers to extend certain insolvency proceedings, with modifications, to foreign companies, Industrial and Provident Societies and Friendly Societies
Remove the Crown's preferential rights in all insolvencies and make provision to ensure unsecured creditors are major beneficiaries
The categories of preferential debts are set out in Schedule 6 of the Insolvency Act 1986. When an insolvency office holder comes to make a distribution in an estate, amounts due in respect of preferential debts are paid after amounts secured by a fixed charge, but before all other liabilities.
Amounts due to the Inland Revenue in respect of income tax and National Insurance contributions in the 12 months prior to the insolvency, and amounts due to HM Customs and Excise including VAT in the 6 months prior to the insolvency. Other categories of preferential debt will remain preferential.
In bankruptcy all amounts no longer categorised as preferential debts will flow to the unsecured creditors.
In corporate insolvencies the next category of creditor to be paid after preferential creditors are holders of floating charges. Under the provisions of the Enterprise Act, a part of the net property (funds that would otherwise be available to satisfy the claims of the floating charge-holder) will be set aside for the benefit of unsecured creditors – the prescribed part.
The method by which the prescribed part is calculated is set out in the Prescribed Part Order
Estimated to be £70 million per year.
The requirement concerning the prescribed part does not apply against funds available to the holders of floating charges created prior to 15 September 2003. The abolition of the crown’s preferential status does apply in these cases.
No – where a floating charge was created prior to 15 September 2003 then there is no statutory requirement to provide the information regarding the prescribed part as per the Insolvency (Amendment) Rules 2003. As an issue of best practice or guidance this information may be provided i.e. to state that the prescribed part does not apply or nil return at the point where it would be provided in cases where section 176A applies.
Reform the financial regime of The Insolvency Service, making it simpler, fairer to creditors and more transparent. Changes to the Insolvency Services Account will maximise the investment return to estates.
