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 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 s263A to s263G 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, 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 |
Uncertain: Enabling provision effective 26 May but subject to further regulation | ||
Application of general duties of directors to shadow
directors where and to the extent that they are capable of so
applying |
S89 |
Further regulation expected Amends s170(5) of the Companies Act 2006 |
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 [2015] (£1,000 limit
mooted) Amends the enabling provision in Schedules 8 and 9 to the Insolvency Act 1986 |
Certain large and listed corporates to publicise
payment practices and policies |
S3 |
Further Companies Act regulation will be required |
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 |
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 3-4 months to
approximately 2 months; and for compulsory strike-off, from 5-6
months to around 3.5 months Amends Part 31 of the Companies Act 2006 |
Ban on corporate directorships |
S87 |
The Government may by regulation make exceptions to this Under s156C there is a transition period of one year. Any remaining corporate directors will automatically cease to be directors unless they fall within an exception. The Government has been consulting on what form the exceptions should take. The latest proposal is to allow corporate directors provided all the directors of the corporate director are natural persons and their details are available in a public searchable register |
2016 | ||
Companies will be required to keep a public "PSC
register" Jan 2016: Companies will be required to keep a register of people with significant control April 2016**: Information must be filed at Companies House (N.B. no requirement to do so before this date) April 2016**: Annual return replaced by "confirmation statement" |
S81 and S82 and Schedule 3 S92 |
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 who can otherwise exercise
significant influence or control over a company Amends the Companies Act 2006 BIS Guidance to be published in October 2015 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 (probably from April 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 |
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.
Meetings to only be called if a prescribed proportion of creditors
(or contributories) demand it Will only apply where an officeholder is actually seeking a decision. Not to meetings required by the Insolvency Act 1986 itself. 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 officeholder 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 [2015]. Minimum number of consents may be changed by regulation Inserts new s,246ZF 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 officeholders Inserts new s379C and s383A into the Insolvency Act 1986 The draft Insolvency Rules [2015] go into more detail |
Wrongful/fraudulent trading: Extension to
administration*** |
S117 |
Administrators will 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 officeholders to assign
personal actions for benefit of estate*** |
S118 |
Liquidators and administrators will be able to 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 officeholder 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 CVA or Companies Act 2006 reconstruction) Inserts new s176ZB into the Insolvency Act 1986 |
Changes to directors' disqualification
regime*** |
Part 9 |
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 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 A liquidator, administrative receiver or administrator will have to submit a report on the conduct of a director in all cases and even if the relevant officeholder does not consider the director unfit to hold office Amends the Company Directors Disqualification Act 1986 |
Changes to insolvency practitioner regulatory regime | SS138 to 146 | Secretary of State given the power to change the regulatory
framework. New series of objectives for regulatory bodies, and
powers to direct bodies to act in accordance with steps suggested
by the Secretary of State Secretary of State will be able to increase the number of recognised professional bodies to regulate insolvency practitioners 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 |
* Amendments which are unlikely to be dealt with further until the Insolvency Rules [2015] which are anticipated to be passed in April 2016
** Proposed date according to the BIS provisional timetable issued in January 2015
*** Further regulation on the Act is not required; wording will come into force and the corresponding Insolvency Rules amended. Draft legislation bringing these provisions into force may be issued as early as October 2015 and Rules will be dealt with by/alongside the modernised Insolvency Rules [2015] (anticipated April 2016)
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.