The Small Business, Enterprise and Employment Act 2015October 2, 2015
The Small Business, Enterprise and Employment Act 2015 received Royal Assent on 26 March 2015 (“the 2015 Act”). The 2015 Act makes radical changes to the current insolvency regime in place in England and Wales under the Insolvency Act 1986 (“the 1986 Act”).
At the outset it should be noted that whilst some of the provisions contained within the 2015 Act apply in NI, the insolvency amendments contained at Part 10 do not. The 2015 Act introduces a number of changes in relation to officeholder litigation, general insolvency procedures as well as regulatory procedures. We have summarised the most important changes below.
1. Changes to Officeholder Litigation
The 2015 Act-
- Amends Section 246 of the 1986 Act and provides administrators with new powers to bring a claim against a former director or other person in respect of fraudulent or wrongful trading. This is in contrast to the provisions of the original 1986 Act, which only enabled a liquidator in the process of a winding-up to bring such a claim.
- Makes provision for an administrator or liquidator to assign the following causes of action (including the proceeds of such an action):- fraudulent trading, wrongful trading, transactions at an undervalue, preferences and extortionate credit transactions.
- Provides that the proceeds from any preference, transactions at undervalue or wrongful or fraudulent trading claim will not form part of the assets available to meet the claims of the holders of any floating charge security.
2. Changes to Insolvency Procedures-Corporate and Individual Insolvency
Corporate insolvency- Part 10 of the 2015 Act
- Increases the period by which the creditors may consensually extend an administration from 6 months to 1 year.
- Amends Paragraph B1 of the 1986 Act and gives the Secretary of State power to introduce regulations to set out conditions which apply in the sale of company assets to a “connected party”.
- Creates a new deemed consent procedure. Under this procedure, the officeholder will be required to circulate details of his proposed decision, which is deemed consented to by the creditors or contributories unless 10% of the of the creditors or contributories object.
- • Removes the need for creditors’ and (in corporate insolvency) contributories’ meetings as the default means of decision making in insolvency procedures. Instead, where an officeholder seeks a decision about an issue arising in the course of an insolvency procedure, a creditors’ (or, as appropriate, contributories’) meeting may only be called if a prescribed proportion of creditors (or contributories) demands it.
- Provides that creditors may opt out of receiving notices required under the 1986 Act. Also, if creditors are only owed a small debt, a proof of debt will not be required. Subsequent amendments to the 1986 Act will specify what amount is classified as a “small debt”-This applies for both corporate and personal insolvency
- Amends Schedules 4 and 5 of the 1986 Act so that all powers exercisable by a liquidator or Trustee in Bankruptcy under those Schedules may be exercised without the need of sanction from the court, secretary of state or creditors. This applies for both corporate and personal insolvency.
Personal insolvency – Part 10 of the 2015 Act
- Abolishes the Receiver and Manager function of the Official Receiver-the OR will be appointed as Trustee in Bankruptcy from the date of the Bankruptcy Order.
- Abolishes Fast Track Voluntary Arrangements.
- Provides that the 28 day time period for the challenge by a debtor or any of his creditors to the approval of an IVA now runs from the date the creditors approved the IVA proposal.
3. Regulatory Changes
Part 10 of the 2015 Act:-
- Gives the Secretary of State the power to directly challenge an Insolvency Practitioner (IP) who is not meeting the requisite standards, which could mean revoking their licence.
- Gives the Secretary of State the power to create a single regulatory body for the insolvency profession. This power needs to be used within seven years of the date of the 2015 Act.
- Introduces a new set of statutory principles which IPs must try to abide by: quality of service at a fair and reasonable cost, integrity and transparency and bearing in mind the interests of creditors and the wider public.
- Allows Recognised Professional Bodies (RPB) to apply to be recognised as being able to grant full or partial authorisation to IPs.
4. Director Disqualification
Part 9 of the 2015 Act makes a number of important amendments to the rules governing director disqualification. Schedule 8 of the 2015 Act makes express provision to amend the NI director disqualification legislation, the Company Directors Disqualification (Northern Ireland) Order 2002, in line with the amendments to the English legislation, once the relevant subordinate legislation has been passed. Part 9 of the 2015 Act:-
- Increases the period of time for applying to the court for disqualification of an unfit director of an insolvent company from two to three years.
- Amends the schedule setting out matters that should be taken into consideration when determining unfitness of a director.
- Gives the Secretary of State power to take disqualification action against individual directors who have been convicted by foreign courts for offences relating to companies.
- Provides it is an offence for an undischarged bankrupt to act in the promotion, formation or management of a company without leave of the Court if they are an undischarged bankrupt in GB or NI.
- Makes provision for compensation orders to be paid to specified creditors, classes of creditors, or to the company by the director. When specifying this amount the Court and the Secretary of State must have regard to the amount of loss causes, nature of the contact and whether the person made any other financial contribution in recompense for the conduct.
- Allows disqualification action to be taken against individuals who have influenced directors who have been subject to disqualification proceedings, known as “the main transgressors”.
Please note; the content of this article is for information purposes only and further advice should be sought from a professional legal advisor before any action is taken. Please contact Cleaver Fulton Rankin on 028 9024 3141 or alternatively visit www.cfrlaw.co.uk