This section covers the following topics in relation to insolvency.
In each case the process is described and information is given in relation to the Authority's position in the process with regard to the recovery of outstanding Local Taxation.
Car should be taken when undertaking insolvency proceedings and the authority should be mindful of the Local Government Ombudsman's case v Wolverhampton City Council
The insolvency process has been changed significantly since the introduction of the Enterprise Act 2002 which is effective from 1st April 2004
A summary of the main changes can be viewed by clicking the link below;
Main changes due to the Enterprise Act 2002
This section provides a background to the requirements. The links below give a short cut to other areas related to Insolvency;
County Court Administration Order
Company Voluntary Arrangements
Company Administrative Receivership
Local Government Finance Act 1992 & Non Domestic Rates (Collection and Enforcement) (Local Lists) Regulations 1989
The regulations enable debts covered by Liability Order to be used as the basis for Insolvency proceedings
They do not mean that an authority has to hold a Liability Order. before it can claim debt in an Insolvency
The authority must have a Liability Order to instigate proceedings however. The Liability Order must cover all debt required
The act completed process of reform of Insolvency in England & Wales. For the first time that both Companies and individuals insolvency covered in one act. At the same time introduced provisions to curb activities of directors
This allowed new powers for court to disqualify directors for:
persistent breaches of company law
fraud
wrongful trading
Prior to act both types of insolvency were dealt with under separate legislation , Common Law & Litigation.
Much of the old law did not apply to the latter part of 20th Century with large Companies and multiple interests. There were conflicting interests of creditors and these were difficult to deal with under old legislation
The main objectives were:
To establish effective & straightforward procedures for dealing with & settling affairs of corporate & personal insolvencies in the interests of their creditors
To provide a statutory framework to encourage companies to;
pay careful attention to their financial affairs
recognise early warning signs of insolvency
to act before interests of their creditors are severely prejudiced
To deter & penalise irresponsible behaviour & malpractice on the part of those who manage Companies affairs
To ensure that those who act in cases of insolvency are competent to do so & conduct themselves in a proper manner
To facilitate the reorganisation of Companies in difficulties to minimise unnecessary loss to creditor & the economy
The 1986 Act removed special status for authorities
Local Taxes are now 'Unsecured Debts'. Also known as 'Trade Creditors
The ranking of debts now very important in the ability to retrieve any money from Insolvency
The ranking of debts applies equally whether Corporate or personal Insolvency.
Insolvency Act 1986 Part XIII S386 & Sch6
Incurred in insolvency ~ payable first from any monies ~ known as pre-preferential debts
Debenture charges & mortgages
Secured on property & other assets
Listed in Sch 6 ~ If insufficient funds to pay all will pay in equal proportion one to another
If insufficient to be paid in full , paid equally one to another
1. Debts due to the Inland Revenue (Until April 2004)
2. Debts due to Customs & Excise (Until April 2004)
3. Social Security Contributions (Until April 2004)
4. Contributions to occupational pension schemes
5. Remuneration of employees
The idea is to find alternatives to deeds of arrangement and make bankruptcy less punitive & more positive
Allows for bankruptcy SS264 - 385
Allows for Individual Voluntary Arrangements SS252 - 263
This is a term used to describe situations which may arise in businesses in England & Wales if unable to satisfy creditors
Co actually becomes insolvent when it is unable to pays debts as and when they fall due.
Insolvency act provides for the following
Company Voluntary Arrangement SS1-7
Company Administration Order SS 8 -27
Company Administrative Receivership SS28-49
Company Winding Up SS73 - 246
Related topics