Measures introduced to improve efficiency in UK insolvencies
Measures which will assist in improving the efficiency of insolvency process in the UK are introduced from 1 October 2015.
A number of measures aimed at increasing the efficiency of insolvency processes throughout the UK come into effect on 1 October 2015. The measures have been introduced under provisions within the Deregulation Act 2015 and other secondary legislation.
The Insolvency (Protection of Essential Supplies) Order 2015 will ensure that insolvency practitioners are better able to secure the continuation of supplies that are essential to the continuation of a business.
The scope of essential supplier provisions contained within the Insolvency Act 1986 is extended beyond statutory utility suppliers to include private suppliers of gas, electricity, water and communications services. This includes landlords, where such services are supplied by the landlord as part of the tenancy.
Those who supply goods or services for the purpose of enabling or facilitating anything to be done by electronic means, essentially IT suppliers, are added to the list of essential supplies. The goods and services referred to are:
- Point of sale terminals
- Computer hardware and software
- Information, advice and technical assistance in connection with the use of information technology
- Data storage and processing
- Website hosting
For contracts entered into on or after 1 October 2015, new legislative provisions will prohibit contractual terms which provide that for termination of that contract (either automatically or upon the supplier's election) on the customer's insolvency, or any other insolvency-related term (such as the ability to charge a higher tariff) will cease to have effect. This will, however, only apply in respect of administrations and company voluntary arrangements (CVAs) for companies, and in respect of individual voluntary arrangements (IVAs) for individuals.
Where a company is wound up, or an individual made bankrupt, the supplier will still be able to rely on and exercise insolvency-related termination provisions in the supply contract.
Even where an insolvency-related clause in a supply contract ceases to have effect, the supplier may still terminate the contract where:
- The insolvency office-holder consents to the termination
- The court permits the termination. The court may only do this if it is satisfied that the continuation of the contract would cause the supplier hardship
- Any charges in respect of the supply which are incurred after the company entered into administration or the CVA took effect, or in the case of an individual when the IVA took effect, have not been paid within 28 days of becoming due
- The supplier has given written notice to the insolvency office-holder that the supply will be terminated unless the insolvency office-holder personally guarantees payment of charges incurred after the company entered into administration or the CVA took effect, or in the case of an individual when the IVA took effect, and the insolvency office-holder does not give the guarantee within 14 days beginning with the day the notice is received by him
The new provisions are not applicable to sequestrations or trust deeds in Scotland.
Appointment and release of administrators
An amendment to Schedule B1 of the Insolvency Act 1986 amends the current requirement for a company or its directors intending to appoint an administrator to give notice of the intention to appoint to anyone entitled to appoint an administrative receiver of the company, to any holder of a qualifying floating charge entitled to appoint an administrator, and to other prescribed persons.
From 1 October 2015, paragraph 26(2) is amended to give effect that notice will only be required to be given to prescribed persons where there is also notice given to anyone entitled to appoint an administrative receiver or to any holder of a qualifying floating charge. This will remove unnecessary delays in the appointment process.
Paragraph 98 is also amended to clarify that the approval of unsecured creditors is not required before an administrator can obtain his or her release in cases where a paragraph 52(1)(b) statement has been made.
A number of other minor changes are also commenced. These include:
- The repeal of section 151 of the Insolvency Act 1986 (payment into bank of money due to a company);
- A change to section 7(4) of the Company Directors Disqualification Act 1986 which will allow the Secretary of State (or Official Receiver) to require information from third parties for the purpose of investigation in non compulsory insolvency cases; and
- The insertion of a new subsection into section 174 of the Insolvency Act 1986 which provides that the liquidator, when a winding-up order is rescinded, has his or her release with effect from the time the court may determine.