The Small Business, Enterprise and Employment Act 2015: Restructuring and Insolvency

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Following Parliamentary approval in March 2015, this Implementation Timetable sets out the key dates and changes which have been published to date on the insolvency provisions of the Small Business, Enterprise and Employment Act. This timetable was updated in October 2015.

We will, of course, provide confirmation and updates as and when further guidance is published.

The Small Business, Enterprise and Employment Act

When will the insolvency-related provisions come into force?

Following Parliamentary approval in March 2015, there has been a level of uncertainty around the implementation timeline for certain company law and insolvency provisions. In particular, many of the changes to the Insolvency Act 1986 will come into force without transitional provisions and so will apply automatically to existing insolvency proceedings.

We have developed a timeline setting out key dates and changes which have been published to date, as well as dates for the future. We will, of course, provide confirmation and updates as and when further guidance is published.

Implementation Timeline

 

 

What will change?

Where?

Amendments

Effective 26 May

 

 

Creditors can extend administration period for longer

S127

Consensual extension of an administration is increased to one year, from six months
Amends para. 76(2) of Schedule B1 to the Insolvency Act 1986

Administrators can distribute prescribed part without court's approval

S128(2)

Carve-out created from the usual restriction placed on administrators making distributions to unsecured creditors
Amends para. 65(3) of Schedule B1 to the Insolvency Act 1986

Administrators cannot put company into CVL using para. 83 procedure if just to distribute the prescribed part

S128(3)

Limits the use of a CVL solely for prescribed part distributions and will have an impact on existing administration proposals/strategy
Amends para. 83 of Schedule B1 to the Insolvency Act 1986

Liquidators and trustees in bankruptcy will not  need the court's sanction to exercise certain powers

S120 and S121

Includes the power to pay classes of creditors in full, compromise claims and bring legal proceedings for preferences/wrongful trading  
Amends ss165, 167 and 314 of the Insolvency Act 1986 and related schedules 

Challenge period for approval of an IVA

S134

Any challenge must be brought within 28 days of the meeting called to consider the IVA proposal
Amends s262(3)(a) of the Insolvency Act 1986

Abolition of fast track IVAs

S135

Procedure will no longer be available unless a debtor submitted a fast track IVA proposal and statement of affairs to the Official Receiver before 26 May
Omits ss263A to 263G of the Insolvency Act 1986 

Regular voluntary liquidation progress reports required

S136 

A progress report must be issued in a voluntary liquidation even if the liquidator changes within the first year
Amends ss92A and 104A and Schedule 10 to the Insolvency Act 1986

Definition of shadow director set out for the purposes of the Insolvency Act 1986 and Company Directors Disqualification Act 1986 

S90

No real change in substance
Amends s251 of the Insolvency Act 1986 and s22(5) of the Company Directors Disqualification Act 1986

Application of general duties of directors to shadow directors where and to the extent that they are capable of so applying

S89

Amends s170(5) of the Companies Act 2006

Enabling provision effective 26 May but subject to further regulation

 

 

Creditors of individuals and corporates will not need to submit a proof of debt to be paid out if their claim is "small"

S131 and S132

What constitutes a small debt and further details will be set out in the Insolvency Rules 2016 (£1,000 limit mooted)
Amends the enabling provision in Schedules 8 and 9 to the Insolvency Act 1986

Regulation of sales to connected parties in administration 

S129

Allows the introduction of new regulations to deal with sales in administration to connected persons, which are concluded without the prior consent of the creditors
Will only be used if the industry does not comply with the findings of the Graham report and the imminent new SIP 16

Effective October 2015

 

 

Reduction of time it takes to strike off and dissolve a company from the public register

S103

Reduction for voluntary strike-off, from three to four months to approximately two months; and for compulsory strike-off, from five to six months to around 3.5 months 
Amends Part 31 of the Companies Act 2006

Changes to directors' disqualification regime

Part 9
SS104-106 and SS108-111

New grounds for bringing disqualification proceedings against directors who have been convicted of offences overseas in connection with the promotion, formation or management of a company overseas, or who are not directors but who exert requisite influence over a director
Revised list of matters for court to take into account when considering whether a person is unfit to be a director of a company, including overseas conduct
Secretary of State will be able to apply for a compensation order against a disqualified director where the misconduct has caused identifiable loss to creditors 
Extension of the period in which the Secretary of State may apply for a disqualification order against a director of an insolvent company from two to three years
Amends the Company Directors Disqualification Act 1986

Wrongful/fraudulent trading: Extension to administration

S117

Administrators have the power to issue proceedings for wrongful or fraudulent trading
Inserts new s246ZA, s246ZB and s246ZC into the Insolvency Act 1986

Allowing corporate insolvency office holders to assign personal actions for benefit of estate

S118

Liquidators and administrators can assign their right to a claim for wrongful trading, fraudulent trading, preferences or transactions at undervalue
Inserts new s246ZD into the Insolvency Act 1986

Confirmation that floating chargeholder does not get the benefit of any office holder action or assignment

S119

The proceeds from any preference, transaction at an undervalue, wrongful or fraudulent trading claim (or assignment) brought by an administrator or liquidator will not form part of the assets available to meet the claims of the holders of any floating charge security (unless displaced by a CVA or Companies Act 2006 reconstruction)
Inserts new s176ZB into the Insolvency Act 1986

Changes to insolvency practitioner regulatory regime

SS137 to 146
Schedule 11

The regulatory framework for insolvency practitioners changes.  Recognised professional bodies (RPBs) will authorise insolvency practitioners, not the Secretary of State, who will take on the role of regulator with power to impose directions and financial or other sanctions on RPBs or take direct actions against individuals.  Insolvency practitioners will have until 30 September 2016 to make the change   
New series of objectives for RPBs
Secretary of State will be able to increase the number of RPBs or introduce a single regulator for the profession, if he thinks fit in due course
Inserts new s391B, s391C, s391D and s391E into the Insolvency Act 1986

Anticipated 2016

 

 

Companies will be required to keep a public "PSC register" 
April 2016*: Companies will be required to keep a register of people with significant control 
June 2016*: Information must be filed at Companies House (N.B. no requirement to do so before this date)

S81, S82 and Schedule 3

UK-incorporated companies (other than publicly traded companies with disclosure obligations) will have to keep a register of PSCs and file information about them at Companies House.  They are broadly individuals who, directly or indirectly, hold over 25 per cent of the shares or voting rights in a company, can appoint or remove a majority of the directors or can otherwise exercise significant influence or control over a company
Amends the Companies Act 2006 

June 2016*: Annual return replaced by "confirmation statement"

S92

Instead of filing an annual return, companies will have to check and confirm that they have delivered, or are delivering with their confirmation statement, the information they were required to deliver to Companies House during the preceding 12 months. Private companies will (from June 2016) be able to opt out of keeping all or any of their registers of members, directors, directors’ residential addresses, secretaries and PSCs.  Instead, companies will have to ensure that equivalent information is available at Companies House, where it will be on the public register and available for inspection
Inserts a new Part 24 into the Companies Act 2006 in place of existing Part 24

Ban on corporate directorships*

S87

Previously scheduled for October 2015.  The Government has now confirmed that this has been put back to October 2016.  The Government has consulted on potential exceptions to the ban.  It is currently considering the responses to its consultations with a view to introducing any exceptions at the same time as the ban.  Under s156C of the Companies Act 2006 there will be a transition period of one year.  Any remaining corporate directors will automatically cease to be directors unless they fall within an exception

Certain large and listed corporates to publicise payment practices and policies

S3

On 25 March the Government issued a statement saying these provisions will come into force in April 2016 and secondary legislation to define "large companies" will be issued at the same time

Provisions with no implementation date published 

 

 

Physical creditors meetings no longer default option**

S122

Abolishes creditors' and contributories' meetings as the default means of decision-making in insolvency procedures.  The office holder will usually be able to decide the alternative decision-making procedure.  He/she must call a meeting if a prescribed proportion of creditors (or contributories) demand it.  He/she must also call a meeting if the Act, the Rules, other legislation or the court require one and can call a meeting if the Act, the Rules, other legislation or the court allow one.  He is also bound by any provisions or court order requiring/prohibiting a particular decision-making procedure
The Secretary of State may, by regulations, abolish other forms of meeting in due course.  As drafted, the abolition will apply, in principle, to the approval of administrators' proposals
Inserts new s246ZE and s379ZA into the Insolvency Act 1986

New deemed consent procedure**

S122

An office holder will circulate details of his proposed decision, which is deemed consented to by the creditors or contributories if a certain proportion of them do not object
See also the Insolvency Rules 2016.  Minimum number of consents may be changed by regulation
Inserts new s246ZF and s379ZB into the Insolvency Act 1986


Supervisor may be first trustee in bankruptcy

S133

The Official Receiver will automatically become the trustee in bankruptcy on the making of a bankruptcy order unless the court orders it can be the supervisor of a preceding IVA 
Creates a new 291A

Getting rid of certain notices**  

S125

Creditors (of both individuals and corporates) will be able to opt out of certain notices issued by insolvency office holders 
Inserts new s379C and s383A into the Insolvency Act 1986
The draft Insolvency Rules 2016 go into more detail

Remaining changes to directors' disqualification regime***

Part 9
S107

A liquidator, administrative receiver or administrator will have to submit a report on the conduct of a director in all cases, even if the relevant office holder does not consider the director unfit to hold office
Amends the Company Directors Disqualification Act 1986

* Proposed date according to the timetable issued in September 2015 on Companies House website

** Anticipated to come into force with corresponding Insolvency Rules 2016 in October 2016

*** Expected to be up and running in June 2016, when the Insolvency Service activates its electronic reporting systems

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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