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The Small Business, Enterprise and Employment Act 2015 (“the Act”), which received Royal Assent on 26 March 2015, contains a number of changes and additions to the Insolvency Act 1986 (“IA 1986”).
A summary of the changes, as they relate to insolvency proceedings, are highlighted below but for full details as to the newest additions to the IA 1986, please see s117 to s146 of the Act which can be located at:
Section 246ZD IA 1986 provides for the ability of office-holders to assign the following rights of action:
Prior to the Act, it was only permissible for office-holders to assign causes of action which vested in the company but not personal actions which vested in the office-holder.
This change opens up the door for potential additional recoveries by office-holders in circumstances where a claim may have good prospects of success, but the estate may be without funds to pursue it. In addition, s176ZA now specifically provides that any recoveries from the claims themselves (or pursuant to an assignment of such claims) will not be included in the assets available to meet the claims of floating chargeholders.
Section 246ZD IA 1986 will come into force once further secondary legislation has been passed. There is no indication, at this stage, as to when this may be.
Pursuant to s246ZA and 246ZB of the IA 1986, an administrator may now bring a claim against a director for fraudulent or wrongful trading.
Prior to the Act, it was only liquidators who could bring such actions. This lead to situations where a company could move from administration to dissolution, without the previous trading of the company being challenged. Arguably there may now be a better chance of recoveries into the company’s estate in circumstances where such claims could be commenced during the administration process, rather than waiting for the company to (potentially) enter liquidation.
The new provisions for fraudulent and wrongful trading in administrations mirror those relating to liquidations.
Further secondary legislation is required to bring s246ZA and 246ZB IA 1986 into force. There is no indication, at this stage, as to when this may be.
Further provisions have been made in the Act for changes to the IA 1986 but with currently no indication as to when they will be brought into force.
If you have any queries about the forthcoming changes or any general insolvency queries, please do not hesitate to contact Prav Reddy on +44 (0)845 359 0024.