Insolvency Act 1986
|Publication Date:||January 01, 1986|
Insolvency Act 1986
1986 CHAPTER 45
An Act to consolidate the enactments relating to company insolvency and winding up (including the winding up of companies that are not insolvent, and of unregistered companies); enactments relating to the insolvency and bankruptcy of individuals; and other enactments bearing on those two subject matters, including the functions and qualification of insolvency practitioners, the public administration of insolvency, the penalisation and redress of malpractice and wrongdoing, and the avoidance of certain transactions at an undervalue
[25th July 1986]
B e it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—
The First Group of Parts
Company Voluntary Arrangements
1 Those who may propose an arrangement.
(1) The directors of a company (other than one for which an administration order is in force, or which is being wound up) may make a proposal under this Part to the company and to its creditors for a composition in satisfaction of its debts or a scheme of arrangement of its affairs (from here on referred to, in either case, as a ‘voluntary arrangement’).
(2) A proposal under this Part is one which provides for some person (‘the nominee’) to act in relation to the voluntary arrangement either as trustee or otherwise for the purpose of supervising its implementation; and the nominee must be a person who is qualified to act as an insolvency practitioner in relation to the company.
(3) Such a proposal may also be made—
( a ) where an administration order is in force in relation to the company, by the administrator, and
( b ) where the company is being wound up, by the liquidator.
2 Procedure where nominee is not the liquidator or administrator.
(1) This section applies where the nominee under section 1 is not the liquidator or administrator of the company.
(2) The nominee shall, within 28 days (or such longer period as the court may allow) after he is given notice of the proposal for a voluntary arrangement, submit a report to the court stating—
( a ) whether, in his opinion, meetings of the company and of its creditors should be summoned to consider the proposal, and
( b ) if in his opinion such meetings should be summoned the date on which, and time and place at which, he proposes the meetings should be held.
(3) For the purposes of enabling the nominee to prepare his report, the person intending to make the proposal shall submit to the nominee—
( a ) a document setting out the terms of the proposed voluntary arrangement, and
( b ) a statement of the company's affairs containing—
(i) such particulars of its creditors and of its debts and other liabilities and of its assets as may be prescribed and
(ii) such other information as may be prescribed.
(4) The court may, on an application made by the person intending to make the proposal, in a case where the nominee has failed to submit the report required by this section, direct that the nominee be replaced as such by another person qualified to act as an insolvency practitioner in relation to the company.
3 Summoning of meetings.
(1) Where the nominee under section 1 is not the liquidator or administrator, and it has been reported to the court that such meetings as are mentioned in section 2(2) should be summoned, the person making the report shall (unless the court otherwise directs) summon those meetings for the time, date and place proposed in the report.
(2) Where the nominee is the liquidator or administrator, he shall summon meetings of the company and of its creditors to consider the proposal for such a time, date and place as he thinks fit.
(3) The persons to be summoned to a creditors' meeting under this section are every creditor of the company of whose claim and address the person summoning the meeting is aware.
Consideration and implementation of proposal
4 Decisions of meetings.
(1) The meetings summoned under section 3 shall decide whether to approve the proposed voluntary arrangement (with or without modifications).
(2) The modifications may include one conferring the functions proposed to be conferred on the nominee on another person qualified to act as an insolvency practitioner in relation to the company.
But they shall not include any modification by virtue of which the proposal ceases to be a proposal such as is mentioned in section 1.
(3) A meeting so summoned shall not approve any proposal or modification which affects the right of a secured creditor of the company to enforce his security, except with the concurrence of the creditor concerned.
(4) Subject as follows, a meeting so summoned shall not approve any proposal or modification under which—
( a ) any preferential debt of the company is to be paid otherwise than in priority to such of its debts as are not preferential debts, or
( b ) a preferential creditor of the company is to be paid an amount in respect of a preferential debt that bears to that debt a smaller proportion than is borne to another preferential debt by the amount that is to be paid in respect of that other debt.
However, the meeting may approve such a proposal or modification with the concurrence of the preferential creditor concerned.
(5) Subject as above, each of the meetings shall be conducted in accordance with the rules.
(6) After the conclusion of either meeting in accordance with the rules, the chairman of the meeting shall report the result of the meeting to the court, and, immediately after reporting to the court, shall give notice of the result of the meeting to such persons as may be prescribed.
(7) References in this section to preferential debts and preferential creditors are to be read in accordance with section 386 in Part XII of this Act.
5 Effect of approval.
(1) This section has effect where each of the meetings summoned under section 3 approves the proposed voluntary arrangement either with the same modifications or without modifications.
(2) The approved voluntary arrangement—
( a ) takes effect as if made by the company at the creditors' meeting, and
( b ) binds every person who in accordance with the rules had notice of, and was entitled to vote at, that meeting (whether or not he was present or represented at the meeting) as if he were a party to the voluntary arrangement.
(3) Subject as follows, if the company is being wound up or an...
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