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Explanatory Memorandum to Insolvency (Northern Ireland) Order 2005

Background and Policy Objectives

4.The background to the Order is that aspects of insolvency law require modernisation to provide a stimulus to entrepreneurship.

5.The existing bankruptcy period, usually three years, is too long and is preventing people who have failed in business but have learned through their mistakes from making a fresh start.

6.If responsible risk taking is to be encouraged bankruptcy must not be seen to stigmatise people.

7.The public has to be effectively protected against the small minority of bankrupts whose conduct is irresponsible, reckless or otherwise culpable.

8.In the case of companies, administrative receivership whereby a receiver is appointed to realise assets subject to security if a borrower defaults favours the creditor who holds the security. There needs to be incentive both for the interests of other creditors to be taken into account and for an attempt to be made, if possible, to rescue the company as a going concern.

9.The right of Crown creditors to preferential payment in an insolvency needs to be removed if ordinary unsecured creditors are to have a fair chance of receiving payment.

10.Finally, provision is needed to allow for reform of the Insolvency Service’s financial regime.

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