Insolvency Act 1986
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The Insolvency Act 1986 (c. 45) is an act of the Parliament of the United Kingdom that provides the legal platform for all matters relating to personal and corporate insolvency in the UK.
Background
The act followed the publication and most of the findings in the Cork Report, including the introduction of the Individual Voluntary Arrangement (IVA) and Company Voluntary Arrangement (CVA) procedures.
Elements of the act were updated by the Enterprise Act 2002, which came into effect on 1 April 2004 and introduced amongst other things the popular "out-of-court" administration route, and the allocation of a limited amount of funding released from assets, known as the "prescribed part", which could be made available to support ordinary unsecured creditors ahead of secured creditors. This limit was initially £600,000, but it was increased to £800,000 by the Insolvency Act 1986 (Prescribed Part) (Amendment) Order 2020 (SI 211/2020) on 6 April 2020 to maintain the real value of the limit.
Those considering the main act should also refer to the Insolvency Rules 1986 and numerous Regulations and other amending legislation since 1986, and also to the best practice which applies to the administration of formal insolvency matters set out in the Statements of Insolvency Practice (SIPs) Archived 10 March 2014 at the Wayback Machine approved by the insolvency practitioner authorising bodies.
Further updates to the act were made by the Corporate Insolvency and Governance Act 2020, which provided a moratorium for companies that were likely to become insolvent and gave additional reliefs for businesses that were adversely impacted by the COVID-19 pandemic.
Provisions
The act essentially governs issues relating to personal bankruptcy and Individual Voluntary Arrangements and all administrative orders relating to company insolvency.
Companies winding up
- Part I - Company Voluntary Arrangements
- Part II - Administration Orders
- Part III - Receivership (ss 22-72H)
- Chapter I - Receivers and Managers (England and Wales)
- Chapter II - Receivers (Scotland)
- Chapter III - Receivers Powers in Great Britain as a whole
- Part IV - Winding Up of Companies Registered Under the Companies Acts (ss 73-219)
- Chapter I - Preliminary
- Chapter II - Voluntary Winding Up (Introductory and General)
- Chapter III - Members' Voluntary Winding Up (ss 91-96)
- Chapter IV - Creditors' Voluntary Winding Up (ss 97-106)
- Chapter V - Provisions Applying to both kinds of Winding up
- Chapter VI - Winding Up by the Court (ss 117-162)
- Chapter VII - Liquidators
- Chapter VIII - Provisions of general application in winding up
- Chapter IX - Dissolution of companies after winding up
- Chapter X - Malpractice before and during liquidation; penalisation of companies and company officers; investigations and prosecutions (ss 206-219). Section 213 lies within this part, and provides for individuals who are aware that business has been carried on with the intent to defraud the company's creditors to be called upon to contribute to the company’s assets. Section 216 prevents the "re-use" of a company name or very similar name when a new company takes the place of a company being liquidated.
- Part V - Winding Up Unregistered Companies (ss 220-229)
- Part VI - Miscellaneous Provisions applying to Companies which are Insolvent or in Liquidation
- Part VII - Interpretation for first group of parts
Insolvency of individuals – bankruptcy
- Part VIII - Individual Voluntary Arrangements
- Part IX - Bankruptcy (ss 264-371)
- Chapter I - Bankruptcy Petitions - Bankruptcy Orders
- Chapter II - Protection of Bankrupt's Estate and Investigation of his Affairs
- Chapter III - Trustees in Bankruptcy
- Chapter IV - Administration by Trustee
- Chapter V - Effect of Bankruptcy on certain rights, transactions etc.
- Chapter VI - Bankruptcy Offences
- Chapter VII - Powers of Court in Bankruptcy
- Part X - Individual Insolvency: General Provisions
- Part XI - Interpretation for second group of parts
Miscellaneous matters
- Part XII - Preferential debts in company and individual insolvency
- Part XIII - Insolvency Practitioners and their qualifications (ss 338-398)
- Part XIV - Public Administration (ss 399-410)
- Part XV - Subordinate Legislation
- Part XVI - Provisions against debt avoidance (England and Wales Only)
- Part XVII - Miscellaneous and General
- Part XVIII - Interpretation
- Part XIX - Final Provisions
Repealed enactments
Section 438 of the act repealed 6 enactments, listed in schedule 12 to the act.
| Citation | Short title | Extent of repeal |
|---|---|---|
| 1970 c. 8 | Insolvency Services (Accounting and Investment) Act 1970 | The whole act. |
| 1976 c. 60 | Insolvency Act 1976 | Section 3. |
| 1985 c. 6 | Companies Act 1985 | In section 463(4), the words "Subject to section 617". |
| Sections 467 to 485. | ||
| In section 486, in the definition of "company" the words "other than in Chapter II of this Part"; and the definitions of "instrument of appointment", "prescribed", "receiver" and "register of charges". | ||
| Sections 488 to 650. | ||
| Sections 659 to 664. | ||
| Sections 665 to 674. | ||
| Section 709(4). | ||
| Section 710(4). | ||
| Section 724. | ||
| Schedule 16. | ||
| In Schedule 24, the entries relating to section 467; all entries thereafter up to and including section 641(2); and the entry relating to section 710(4). | ||
| 1985 c. 65 | Insolvency Act 1985 | Sections 1 to 11. |
| Section 15. | ||
| Section 17. | ||
| Section 19. | ||
| Sections 20 to 107. | ||
| Section 108(1) and (3) to (7). | ||
| Sections 109 to 211. | ||
| Sections 212 to 214. | ||
| Section 216. | ||
| Section 217(1) to (3). | ||
| Sections 221 to 234. | ||
| In section 235, subsections (2) to (5). | ||
| In section 236, subsections (3) to (5). | ||
| In Schedule 1, paragraphs 1 to 4, and sub-paragraph (4) of paragraph 5. | ||
| Schedules 3 to 5. | ||
| In Schedule 6, paragraphs 5, 6, 9, 15 to 17, 20 to 22, 25 to 44 and 48 to 52. | ||
| Schedule 7. | ||
| In Schedule 9, paragraphs 1 and 4 to 24. | ||
| Schedule 10. | ||
| 1985 c. 66 | Bankruptcy (Scotland) Act 1985 | In Schedule 7, paragraphs 19 to 22. |
| 1986 c. 44 | Gas Act 1986 | In Schedule 7, paragraph 31. |
Schedules
- Schedule B1, on the new administration procedure after the Enterprise Act 2002.
Notes
- ↑ Section 444.
- ↑ Section 440.
- ↑ Section 441.
- ↑ Section 443. The Insolvency Act 1985 (Commencement No. 5) Order 1986.
References
- ↑ Lyndon Norley, Kirkland & Ellis International LLP and Joseph Swanson and Peter Marshall, Houlihan Lokey (2008). A Practitioner's Guide to Corporate Restructuring. City & Financial Publishing, 1st edition ISBN 978-1-905121-31-1
- ↑ Eaton, A., Maximum prescribed part increased from £600,000 to 800,000, Burges Salmon, accessed 23 August 2023
- ↑ UK Legislation, Explanatory Memorandum to the Insolvency Act 1986 (Prescribed Part) (Amendment) Order 2020, prepared by the Department for Business, Energy and Industrial Strategy in conjunction with the Insolvency Service, accessed 23 August 2023
- ↑ "R3: Association of Business Recovery Professionals". Archived from the original on 10 March 2014. Retrieved 14 November 2013.
- ↑ "Insolvency Act 1986", legislation.gov.uk, The National Archives, 1986 c. 45
External links
- Text of the Insolvency Act 1986 as in force today (including any amendments) within the United Kingdom, from legislation.gov.uk.
- Text of the Insolvency Act 1986 as originally enacted or made within the United Kingdom, from legislation.gov.uk.
- Text of the act from insolvencyhelpline.co.uk Archived 22 January 2009 at the Wayback Machine
- Insolvency Service website
- Insolvency Practitioners Association website
