3.The Act provides for:
small companies1 in financial difficulty to make voluntary arrangements with their creditors by providing the option of a moratorium2 to give the firm’s management time to put a rescue plan to creditors and for minor modifications to be made to the provisions relating to the existing company3 and individual4 voluntary arrangement schemes and the administration order procedure5;
the Secretary of State to recognise a body which can authorise persons to act as nominees or supervisors in company or individual voluntary arrangements;
changes to the procedure for disqualifying persons who are unfit to be company directors by allowing the Secretary of State to accept undertakings which would have the same legal effects as disqualification orders6 made by a court and for various technical amendments to be made to existing legislation in relation to disqualification;
the procedure for reporting delinquent officers and members of a company with a view to prosecution to be changed;
amendment of section 219 of the Insolvency Act 1986 to ensure that it is compatible with the European Convention on Human Rights (ECHR);
the value of a deceased insolvent’s interest in jointly-owned property to be recoverable for the benefit of the insolvent estate (England and Wales only);
a power to make rules or regulations concerning the investment of funds held in the Insolvency Services Account on behalf of bankruptcy estates, and the payment of interest on such funds; and
a power to make regulations to give effect with or without modifications to the model law on cross-border insolvency which was adopted by the United Nations Commission on International Trade Law (UNCITRAL) of which the UK is a member state; and for the amendment of section 426 of the Insolvency Act 1986 (co-operation between courts exercising insolvency jurisdiction).
Section 247(3) Companies Act 1985 defines a small company as one which satisfies two or more of the following criteria:
Turnover – not more than £2.8 million.
Balance sheet total – not more than £1.4 million.
Number of employees – not more than 50.
Moratorium is a temporary stay, or in Scotland a sist, on certain legal acts and processes from being performed or continued.
Company Voluntary Arrangements were introduced by the Insolvency Act 1986 Part I and provide a means for financially troubled companies to reach a legally binding agreement with their creditors in satisfaction of their debts or a scheme of arrangement of their affairs. A proposal for a voluntary arrangement will determine who the nominee is to be. The nominee is the person chosen by the directors to put their voluntary arrangement to the creditors and the company and to act as supervisor of the voluntary arrangement if it is implemented. A liquidator or an administrator of the company may also propose a voluntary arrangement.
Individual Voluntary Arrangements were introduced by the Insolvency Act 1986 Part VIII and similarly provide a means for financially troubled individuals to reach a legally binding agreement with their creditors in satisfaction of their debts or a scheme of arrangement of their affairs (England and Wales only).
The Administration Order Procedure was introduced by the Insolvency Act 1986 Part II.
A person can be disqualified by the courts, by way of a disqualification order, from being an insolvency practitioner or director or from being involved in the promotion, formation and management of a company, for a maximum of fifteen years, if his conduct in an insolvent company (or partnership in England and Wales) makes him unfit and if other specified conditions are satisfied.