Explanatory note

This Order amends the Insolvency Act 1986 (c.45) (“the 1986 Act”). It is made by the Secretary of State in accordance with the affirmative resolution procedure under section 17 of the Legislative and Regulatory Reform Act 2006.

The Order amends provisions in Part 8 of the 1986 Act which provide for the making of individual voluntary arrangements and amends the provision in Part 13 of the Act which permits persons other than insolvency practitioners to be authorised to act in relation to voluntary arrangements.

Article 1 provides for the citation, commencement, extent and interpretation of the Order. Articles 3, 4 and 5 extend to England and Wales. Article 6 extends to England and Wales and to Scotland.

Article 2 of the Order makes provision for the amendment of certain sections of Part 8 as follows.

Article 3(1) amends section 256A (debtor’s proposal and nominee’s report), so as to remove the requirement to submit a report to the court in those cases in which no application has been made to the court for an interim order. Paragraph (2) makes amendments to section 257 (summoning of creditors’ meeting) consequential upon the amendment made to section 256A and removes the reference to a report made to the court under section 256A, replacing it with a report to the debtor’s creditors. Paragraph (3) amends section 259 (report of decisions to court) as a consequence of the change made to section 256A. The amendment removes the reference to a report being made to the court under section 256A.

Article 4(1) makes extensive amendments to section 263A (availability).

The amendment makes provision extending to a larger group of persons the availability of the “fast-track” procedure for the proposal and approval of an individual voluntary arrangement.

It extends the class of person who may act as a nominee in such “fast-track” arrangements from the official receiver, to both insolvency practitioners and persons authorised under section 389A. That extension is, however, subject to certain conditions affecting the debtor, notably the limit on the aggregate amount of the debtor’s debt. In this respect, the amendment imposes a limit of £75,000. This amount may be changed by order made by the Secretary of State. The official receiver may only accept proposals from undischarged bankrupts but except for that condition, the debtor is not subject to any other conditions when the official receiver is acting in relation to the arrangement.

The new provision permits nominees other than the official receiver to accept proposals from both undischarged bankrupts and debtors who are not undischarged bankrupts.

Paragraph (2) amends section 263B (decision) in order to made amendments consequential upon the changes introduced by amended section 263A. All references to the official receiver are replaced by a reference to the “nominee” thereby incorporating references to nominees other than the official receiver. Provision corresponding to existing section 256(3) and 256A(4), is also included permitting an application to be made to the court to replace a nominee (other than the official receiver) of a fast-track voluntary arrangement in certain circumstances.

Paragraph (3) substitutes for a requirement in section 263C (result) that the official receiver report to the court whether the voluntary arrangement has been approved or rejected, a requirement for the nominee, who may be either the official receiver or an insolvency practitioner or authorised person, to merely notify the Secretary of State of the same.

Paragraph (4) amends Section 263D (approval of voluntary arrangement) consequential upon the amendment made to section 263C and replaces references to the official receiver and to his report to the court, with references to the nominee and notice to the Secretary of State.

Paragraph (5) amends the provisions of section 263E (implementation). Section 263E applies section 263 to fast-track voluntary arrangements. The amendment ensures that in its application to fast-track voluntary arrangements, section 263 is read as also including a reference to the replacement of a nominee in respect of those arrangements.

Paragraph (6) amends section 263F (revocation) consequential upon the amendment made to section 263C by substituting for references to the official receiver and his report to the court, references to the nominee and notification of the Secretary of State. It also provides that a nominee (other than the official receiver) of a fast-track individual voluntary arrangement may also apply for revocation of the arrangement on the grounds specified in section 263F.

Article 5 provides transitional provisions dealing with those substantive changes made to Part 8 of the 1986 Act by the Order. No transitional provision is made for the new fast-track arrangements since existing arrangements continue unaffected. However, transitional provision is required with respect to the amendments made to the procedure for individual voluntary arrangements where no interim order has been applied for or granted prior to the proposal being made by the debtor. Where a proposal has been made to a nominee prior to the commencement of this Order, the existing provisions continue to apply.

Article 6 amends section 389A of the 1986 Act so as to permit the Secretary of State to recognise bodies for the purpose of authorising persons to act in relation solely to voluntary arrangements under Part 1 or solely in relation to voluntary arrangements under Part 8.