Part I Modified Provisions of Sections 1 to 7B of the ActF1

For sections 1 to 7B of the Act there shall be substituted:—

“PART I

Partnership Voluntary Arrangements

The proposal

Those who may propose an arrangement

1

(1)

The members of an insolvent partnership (other than one F2which is in administration, or which is being wound up as an unregistered company, or in respect of which an order has been made by virtue of article 11 of the Insolvent Partnerships Order 1994) may make a proposal under this Part to the partnership’s creditors for a composition in satisfaction of the debts of the partnership 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 F3... in relation to the voluntary arrangement.

(3)

Such a proposal may also be made—

(a)

where F4the partnership is in administration, by the administrator,

(b)

where the partnership is being wound up as an unregistered company, by the liquidator, and

(c)

where an order has been made by virtue of article 11 of the Insolvent Partnerships Order 1994, by the trustee of the partnership.

F5(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Moratorium

1A

(1)

Where the members of an eligible insolvent partnership intend to make a proposal for a voluntary arrangement, they may take steps to obtain a moratorium for the insolvent partnership.

(2)

Subject to subsections (3), (4), (5), (6) and (7), the provisions of Schedule A1 to this Act have effect with respect to—

(a)

insolvent partnerships eligible for a moratorium under this section,

(b)

the procedure for obtaining such a moratorium,

(c)

the effects of such a moratorium, and

(d)

the procedure applicable (in place of sections 2 to 6 and 7) in relation to the approval and implementation of a voluntary arrangement where such a moratorium is or has been in force.

(3)

Certain of the provisions applied in relation to insolvent partnerships by virtue of subsection (2) are modified in their application in relation to insolvent partnerships in such manner that, after modification, they are as set out in Part II of Schedule 1 to the Insolvent Partnerships Order 1994.

(4)

Paragraphs 4A, 4B, 4C, 4D, 4E, 4F, 4G, 4H, 4I, 4J, 4K, 5, 7(4), 8(8), 32(7), 34(2), 41(5) and 45 of Schedule A1 to this Act shall not apply.

(5)

An insolvent partnership is not liable to a fine under paragraphs 16(2), 17(3), 18(3), 19(3), 22 or 23(1) of Schedule A1 to the Act.

(6)

Notwithstanding subsection (5) an officer of an insolvent partnership may be liable to imprisonment or a fine under the paragraphs referred to in that subsection in the same manner as an officer of a company.

(7)

In the application of Schedule A1, and the application of the entries in Schedule 10 relating to offences under Schedule A1, to insolvent partnerships—

(a)

references to the directors or members of a company shall be construed as references to the members of an insolvent partnership,

(b)

references to officers of a company shall be construed as references to the officers of an insolvent partnership,

(c)

references to a meeting of a company shall be construed as references to a meeting of the members of an insolvent partnership, and

(d)

references to a floating charge shall be construed as references to a floating charge created under section 5 of the Agricultural Credits Act 1928.

Procedure where nominee is not the liquidator, administrator or trustee

2

(1)

This section applies where the nominee under section 1 is not the liquidator, administrator or trustee of the insolvent partnership and the members of the partnership do not propose to take steps to obtain a moratorium under section 1A for the insolvent partnership.

(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, the proposed voluntary arrangement has a reasonable prospect of being approved and implemented,

(F6b)

whether, in his opinion, the proposal should be considered by a meeting of the members of the partnership and by the partnership’s creditors, and

(c)

if in his opinion it should, the date on which, and time and place at which, he proposes a meeting should be held.

(3)

The nominee shall also state in his report whether there are in existence any insolvency proceedings in respect of the insolvent partnership or any of its members.

(4)

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 partnership’s affairs containing—

(i)

such particulars of the partnership’s creditors and of the partnership’s debts and other liabilities and of the partnership property as may be prescribed, and

(ii)

such other information as may be prescribed.

(5)

The court may—

(a)

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 or has died, or

(b)

on an application made by that person or the nominee, in a case where it is impracticable or inappropriate for the nominee to continue to act as such,

direct that the nominee be replaced as such by another person qualified to act as an insolvency practitioner F7... in relation to the voluntary arrangement.

Summoning of meetings

3

(1)

Where the nominee under section 1 is not the liquidator, administrator or trustee of the insolvent partnership, and it has been reported to the court F8under section 2(2) that the proposal should be considered by a meeting of the members of the partnership and by the partnership’s creditors, the person making the report shall (unless the court otherwise F9directs)—

(a)

summon a meeting of the members of the partnership to consider the proposal for the time, date and place proposed in the report, and

(b)

seek a decision from the partnership’s creditors as to whether they approve the proposal.

(2)

Where the nominee is the liquidator, administrator or trustee of the insolvent partnership, he F10must—

(a)

summon a meeting of the members of the partnership to consider the proposal for such time, date and place as he thinks fit, and

(b)

seek a decision from the partnership’s creditors as to whether they approve the proposal.

(F113)

A decision of the partnership’s creditors as to whether they approve the proposal is to be made by a qualifying decision procedure.

(4)

Notice of the qualifying decision procedure must be given to every creditor of the partnership of whose claim and address the person summoning the meeting is aware.

Consideration and implementation of proposal

Decisions of F12the members of the partnership and its creditors

4

(F131)

This section applies where, under section 3—

(a)

a meeting of the members of the partnership is summoned to consider the proposed voluntary arrangement, and

(b)

the partnership’s creditors are asked to decide whether to approve the proposed voluntary arrangement.

(1A)

The members of the partnership and its creditors may 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 F14... in relation to the voluntary arrangement.

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)

F15Neither the members of the partnership nor its creditors may approve any proposal or modification which affects the right of a secured creditor of the partnership to enforce his security, except with the concurrence of the creditor concerned.

(4)

Subject as follows, F16neither the members of the partnership nor its creditors may approve any proposal or modification under which—

(a)

any preferential debt of the partnership is to be paid otherwise than in priority to such of its debts as are not preferential debts, F17...

(F18aa)

any ordinary preferential debt of the partnership is to be paid otherwise than in priority to any secondary preferential debts that it may have,

(b)

a preferential creditor of the partnership is to be paid an amount in respect of F19an ordinary preferential debt that bears to that debt a smaller proportion than is borne to F20another ordinary preferential debt by the amount that is to be paid in respect of that other debt F21F22...

(c)

a preferential creditor of the partnership is to be paid an amount in respect of a secondary preferential debt that bears to that debt a smaller proportion than is borne to another secondary preferential debt by the amount that is to be paid in respect of that other debt F23or

(d)

in the case of a company which is a relevant financial institution (see section 387A), any non-preferential debt is to be paid otherwise than in accordance with the rules in section 176AZA(2) or (3).

However, F24such a proposal or modification may be approved with the concurrence of the F25... creditor concerned.

(5)

Subject as above, F26the meeting of the members of the partnership and the qualifying decision procedure shall be conducted in accordance with the rules.

(6)

After the conclusion of F27the meeting of the members of the partnership 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 all those who were sent notice of the meeting in accordance with the rules.

(F286A)

After the partnership’s creditors have decided whether to approve the proposed voluntary arrangement the person who sought the decision must—

(a)

report the creditors’ decision to the court, and

(b)

immediately after reporting to the court, give notice of the creditors’ decision to everyone who was invited to consider the proposal or to whom notice of a decision procedure or meeting was delivered.

(7)

References in this section to preferential debts F29, ordinary preferential debts, secondary preferential debts and preferential creditors are to be read in accordance with section 386 in Part XII of this Act.

Approval of arrangement

4A

(1)

This section applies to a decision, under section 4, with respect to the approval of a proposed voluntary arrangement.

(2)

The decision has effect if, in accordance with the rules—

(a)

it has been taken by F30the meeting of the members of the partnership summoned under section 3 and by the partnership’s creditors pursuant to that section, or

(b)

(subject to any order made under subsection (6)) it has been taken by the F31partnership’s creditors pursuant to that section.

(3)

If the decision taken by the F32partnership’s creditors differs from that taken by the meeting of the members of the partnership, a member of the partnership may apply to court.

(4)

An application under subsection (3) shall not be made after the end of the period of 28 days beginning with—

(a)

the day on which the decision was taken by the partnership’s creditors, or

(b)

where the decision of the meeting of the members of the partnership was taken on a later day, that day.

(F335)

Where a member of an insolvent partnership which is regulated applies to the court under subsection (3), the appropriate regulator is entitled to be heard on the application.

(5A)

“The appropriate regulator” means—

(a)

where the partnership is a PRA-regulated partnership, the Prudential Regulation Authority and the Financial Conduct Authority;

(b)

in any other case the Financial Conduct Authority.

(5B)

For the purposes of subsection (5A), a “PRA-regulated partnership” means a partnership which—

(a)

is or has been, a PRA–authorised person (within the meaning of the Financial Services and Markets Act 2000),

(b)

is, or has been, an appointed representative within the meaning given by section 39 of that Act, whose principal (or one of whose principals) is, or was, a PRA-authorised person, or

(c)

is carrying on, or has carried on, a PRA-regulated activity (within the meaning of that Act) in contravention of the general prohibition under section 19 of that Act.

(6)

On an application under subsection (3), the court may—

(a)

order the decision of the meeting of the members of the partnership to have effect instead of the decision of the partnership’s creditors, or

(b)

make such other order as it thinks fit.

(7)

In this section “regulated” in relation to an insolvent partnership means a person who—

(a)

is, or has been, an authorised person within the meaning given by section 31 of the Financial Services and Markets Act 2000,

(b)

is, or has been, an appointed representative within the meaning given by section 39 of that Act, or

(c)

is carrying on, or has carried on, a regulated activity, within the meaning given by section 22 of that Act, in contravention of the general prohibition within the meaning given by section 19 of that Act.

Effect of approval

5

(1)

This section applies where a decision approving a voluntary arrangement has effect under section 4A.

(2)

The voluntary arrangement—

(a)

takes effect as if made by the members of the partnership at the F34time the creditors decided to approve the voluntary arrangement, and

(b)

binds every person who in accordance with the rules—

(i)

was entitled to vote F35in the qualifying decision procedure by which the creditors’ decision to approve the voluntary arrangement was made, or

(ii)

would have been so entitled if he had had notice of F36the procedure,

as if he were a party to the voluntary arrangement.

(2A)

If—

(a)

when the arrangement ceases to have effect any amount payable under the arrangement to a person bound by virtue of subsection 2(b)(ii) has not been paid, and

(b)

the arrangement did not come to an end prematurely,

the insolvent partnership shall at that time become liable to pay to that person the amount payable under the arrangement.

(3)

Subject as follows, if the partnership is being wound up as an unregistered company, or F37is in administration or an order by virtue of article 11 of the Insolvent Partnerships Order 1994 is in force, the court may do one or both of the following, namely—

(a)

by order—

(i)

stay all proceedings in the winding up or in the proceedings under the order made by virtue of the said article 11 (as the case may be), including any related insolvency proceedings of a member of the partnership in his capacity as such, or

(ii)

F38provide for the appointment of the administrator to cease to have effect;

(b)

give such directions as it thinks appropriate for facilitating the implementation of the voluntary arrangement with respect to—

(i)

the conduct of the winding up, the proceedings by virtue of the said article 11 or the administration (as the case may be), and

(ii)

the conduct of any related insolvency proceedings as referred to in paragraph (a)(i) above.

(4)

The court shall not make an order under subsection (3)(a)—

(a)

at any time before the end of the period of 28 days beginning with the first day on which each of the reports required by section 4(6) F39and (6A) has been made to the court, or

(b)

at any time when an application under the next section or an appeal in respect of such an application is pending, or at any time in the period within which such an appeal may be brought.

Challenge of decisions

6

(1)

Subject to this section, an application to the court may be made, by any of the persons specified below, on one or both of the following grounds, namely—

(a)

that a voluntary arrangement which has effect under section 4A unfairly prejudices the interests of a creditor, member or contributory of the partnership;

(b)

that there has been some material irregularity at or in relation to F40the meeting of the members of the partnership or in the relevant qualifying decision procedure.

(2)

The persons who may apply under this section are—

(a)

a person entitled, in accordance with the rules, to vote at F41the meeting of the members of the partnership or in the relevant qualifying decision procedure;

(b)

a person who would have been entitled, in accordance with the rules, to vote F42in the relevant qualifying decision procedure if he had had notice of it;

(c)

the nominee or any person who has replaced him under section 2(5) or 4(2); and

(d)

if the partnership is being wound up as an unregistered company or F43is in administration or an order by virtue of article 11 of the Insolvent Partnerships Order 1994 is in force, the liquidator, administrator or trustee of the partnership.

(3)

An application under this section shall not be made—

(a)

after the end of the period of 28 days beginning with the first day on which each of the reports required by section 4(6) F44and (6A) has been made to the court, or

(b)

in the case of a person who was not given notice of the F45relevant qualifying decision procedure, after the end of the period of 28 days beginning with the day on which he became aware that F46the relevant qualifying decision procedure had taken place,

but (subject to that) an application made by a person within subsection (2)(b) on the ground that the voluntary arrangement prejudices his interests may be made after the voluntary arrangement has ceased to have effect, unless it came to an end prematurely.

(4)

Where on such an application the court is satisfied as to either of the grounds mentioned in subsection (1), it may do F47any of the following, namely—

(a)

revoke or suspend any decision approving the voluntary arrangement which has effect under section 4A or, in a case falling within subsection (1)(b), any decision taken by the meeting F48of the members of the partnership, or in the relevant qualifying decision procedure, which has effect under that section;

(b)

give a direction to any person for the summoning of F49a further meeting of the members of the partnership to consider any revised proposal the person who made the original proposal may make or, in a case falling within subsection (1)(b), F50and relating to the meeting of the members of the partnership, a further meeting of the members of the partnership to reconsider the original proposal.

(F51c)

direct any person—

(i)

to seek a decision from the partnership’s creditors (using a qualifying decision procedure) as to whether they approve any revised proposal the person who made the original proposal may make, or

(ii)

in a case falling within subsection (1)(b) and relating to the relevant qualifying decision procedure, to seek a decision from the partnership’s creditors (using a qualifying decision procedure) as to whether they approve the original proposal.

(5)

Where at any time after giving a direction under subsection (4)(b) F52or (c) in relation to a revised proposal the court is satisfied that the person who made the original proposal does not intend to submit a revised proposal, the court shall revoke the direction and revoke or suspend any decision approving the voluntary arrangement which has effect under section 4A.

(6)

In a case where the court, on an application under this section with respect to any meeting F53or relevant qualifying decision procedure —

(a)

gives a direction under subsection (4)(b) F54or (c), or

(b)

revokes or suspends an approval under subsection (4)(a) or (5),

the court may give such supplemental directions as it thinks fit, and, in particular, directions with respect to things done under the voluntary arrangement since it took effect.

(7)

Except in pursuance of the preceding provisions of this section,

(F55a)

a decision taken at a meeting F56of the members of the partnership summoned under section 3 is not invalidated by any irregularity at or in relation to the meeting F57, and

(b)

a decision of the creditors of the partnership made in the relevant qualifying decision procedure is not invalidated by any irregularity in relation to the relevant qualifying decision procedure.

False representations, etc.

6A

(1)

If, for the purpose of obtaining the approval of the members or creditors of an insolvent partnership or of the members or creditors of any of its members to a proposal for a voluntary arrangement in relation to the partnership or any of its members, a person who is an officer of the partnership or an officer (which for this purpose includes a shadow director) of a corporate member in relation to which a voluntary arrangement is proposed—

(a)

makes a false representation, or

(b)

fraudulently does, or omits to do, anything,

he commits an offence.

(2)

Subsection (1) applies even if the proposal is not approved.

(3)

A person guilty of an offence under this section is liable to imprisonment or a fine, or both.

Implementation of proposal

7

(1)

This section applies where a voluntary arrangement has effect under section 4A.

(2)

The person who is for the time being carrying out in relation to the voluntary arrangement the functions conferred—

(a)

on the nominee by virtue of the approval F58of the voluntary arrangement by the members of the partnership or its creditors (or both) pursuant to section 3, or

(b)

by virtue of section 2(5) or 4(2) on a person other than the nominee,

shall be known as the supervisor of the voluntary arrangement.

(3)

If any of the partnership’s creditors or any other person is dissatisfied by any act, omission or decision of the supervisor, he may apply to the court; and on the application the court may—

(a)

confirm, reverse or modify any act or decision of the supervisor,

(b)

give him directions, or

(c)

make such other order as it thinks fit.

(4)

The supervisor—

(a)

may apply to the court for directions in relation to any particular matter arising under the voluntary arrangement, and

(b)

is included among the persons who may apply to the court for the winding up of the partnership as an unregistered company or for an administration order to be made in relation to it.

(5)

The court may, whenever—

(a)

it is expedient to appoint a person to carry out the functions of the supervisor, and

(b)

it is inexpedient, difficult or impracticable for an appointment to be made without the assistance of the court,

make an order appointing a person who is qualified to act as an insolvency practitioner F59... in relation to the voluntary arrangement, either in substitution for the existing supervisor or to fill a vacancy.

(6)

The power conferred by subsection (5) is exercisable so as to increase the number of persons exercising the functions of supervisor or, where there is more than one person exercising those functions, so as to replace one or more of those persons.

Prosecution of delinquent officers of partnership

7A

(1)

This section applies where a moratorium under section 1A has been obtained for an insolvent partnership or the approval of a voluntary arrangement in relation to an insolvent partnership has taken effect under section 4A or paragraph 36 of Schedule A1.

(2)

If it appears to the nominee or supervisor that any past or present officer of the insolvent partnership has been guilty of any offence in connection with the moratorium or, as the case may be, voluntary arrangement for which such officer is criminally liable, the nominee or supervisor shall forthwith—

(a)

report the matter to the Secretary of State, and

(b)

provide the Secretary of State with such information and give him such access to and facilities for inspecting and taking copies of documents (being information or documents in the possession or under the control of the nominee or supervisor and relating to the matter in question) as the Secretary of State requires.

(3)

Where a prosecuting authority institutes criminal proceedings following any report under subsection (2), the nominee or supervisor, and every officer and agent of the insolvent partnership past or present (other than the defendant), shall give the authority all assistance in connection with the prosecution which he is reasonably able to give.

• For this purpose—

• “agent” includes any banker or solicitor of the insolvent partnership and any person employed by the insolvent partnership as auditor, whether that person is or is not an officer of the insolvent partnership,

• “prosecuting authority” means the Director of Public Prosecutions or the Secretary of State.

(4)

The court may, on the application of the prosecuting authority, direct any person referred to in subsection (3) to comply with that subsection if he has failed to do so.

Arrangements coming to an end prematurely

7B

For the purposes of this Part, a voluntary arrangement the approval of which has taken effect under section 4A or paragraph 36 of Schedule A1 comes to an end prematurely if, when it ceases to have effect, it has not been fully implemented in respect of all persons bound by the arrangement by virtue of section 5(2)(b)(i) or, as the case may be, paragraph 37(2)(b)(i) of Schedule A1”.