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Insolvency reforms PDF Print

The Enterprise Act, received Royal Assent on 7 November 2002, contains a number of measures aimed at modernising corporate insolvency law. Important reforms came into effect on 15 September 2003, as outlined below.

Restrictions on the use of administrative receivership and a streamlining of the system of administration

The Act will encourage the survival of viable companies where possible. The need for a court hearing will be significantly reduced, while stakeholders will still receive adequate safeguards. Administration will be faster, cheaper, and more flexible.

The balance will be shifted away from administrative receivership in favour of the collective procedure of administration, considering the interests of all creditors.

The abolition of the Crown's preferential right to recover unpaid taxes

Unsecured creditors, particularly small firms, will benefit from this measure, which will ensure that they are major beneficiaries.

Other measures came into force on 1 April 2004:

The provision of a modern bankruptcy regime encouraging entrepreneurship

The Act aims to provide support to those wishing to make a fresh start by discharging them from their debts and releasing them from restrictions after a maximum period of 12 months, if they cooperate with the Official Receiver.

At the same time, it will offer protection against abuse by establishing a new Bankruptcy Restrictions Order system. Those that have abused creditors and the public will be subject to restrictions for between 2 and 15 years.

The measures also entail the removal of outdated restrictions, and the introduction of a general three year limit on the period in which a trustee may deal with an interest in a bankrupt's or former bankrupt's home.

Modernisation of the financial regime of the Insolvency Service

The system will be made more transparent and fee structures will be simplified. Changes to the Insolvency Services Account will mean that estates will receive the maximum return on investment, which will benefit many small firms.

Useful links:

www.dti.gov.uk/bbf/Enterprise%20Act/index.html
http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/legislation/reform.htm

 

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