Recently the Government introduced the Small Business, Enterprise and Employment Bill, which if passed in its current form will make significant changes to the insolvency profession.
The key proposals are as follows:
- The power for administrators to bring fraudulent or wrongful trading claims, at present only liquidators can bring these claims.
- Liquidators and administrators are to be given permission to assign claims (and their proceeds) for fraudulent and wrongful trading, transactions at an undervalue, preferences and extortionate credit transactions.
- Proceeds of office holder claims are to be excluded from the general assets of a company available to a floating charge holder.
- The removal of the need for a liquidator to seek sanction for the exercise of the powers contained within Schedule 4 of the Insolvency Act.
- There will no longer be any requirement for physical creditors’ meetings, unless a specified proportion of creditors request a meeting.
- Creditors will be able to opt out of the majority of notices issued by administrators or liquidators.
- The procedure in which IPs report director conduct to the Secretary of State will be streamlined.
- An extension of the period for an application for disqualification of directors to three years.
- In the two years following disqualification the Secretary of State will be able to apply for a compensation order against a disqualified director. The proceeds from a compensation order could be paid to specified creditors or class of creditors or as a contribution to the insolvent company’s assets generally.
- The introduction of a regulatory framework to hold the regulators of IPs to account.
The Secretary of State will have the reserved right to establish a sole regulator if the proposed changes are viewed as not having the effect of increasing public confidence in the regulatory regime.
The Bill also reserves the right for the Secretary of State to make regulations prohibiting or imposing conditions on transactions between administrators and connected parties, this is not limited to prepack administration sales only.
These proposals are of great interest and we will continue to monitor the passage of the Bill with interest. The Bill will now be reviewed by the Public Bill Committee with its report due to be presented to Parliament in early November 2014. We will keep you updated.