Insolvency

England and Wales insolvency law has been modernised considerably in the last 25 years.  The reforms have made it more user friendly and cost efficient than the equivalent Irish provisions.   Our guides give an overview of England and Wales insolvency procedures. 

Bankruptcy can be initiated by creditors or by the debtor himself in order to obtain protection from multiple claims.   The bulk of the bankrupt's assets are available for sale and distribution to creditors.  There are special provisions in relation to the bankrupt's residence. 

A bankrupt may be "discharged" from bankruptcy after one year and regain normal legal capacity.  In practice, there are likely to be requirements for income contributions for up to three years.  Certain restrictions and duties apply for a certain period after bankruptcy.

Individual voluntary arrangements are a flexible and popular alternative to bankruptcy.  Unlike their Irish equivalent, there will not necessarily be significant Court involvement. They must be sponsored by an independent insolvency practitioner who has certain duties. 

The individual voluntary arrangement is binding on all creditors, if 75% in value agree.  Dissenting creditors can apply to Court if they are unfairly prejudiced.  There is great flexibility in relation to the contents of IVA agreements.  If creditors perceive that the advantages under the arrangement are greater than those available in bankruptcy, they are likely to accept it.

Liquidation is the general method for termination of a company's existence.  There are different procedures for the liquidation of solvent and insolvent companies. Liquidation procedures involve the "winding up" of the company by the sale of its assets and distribution to its creditors.

Liquidation can be undertaken by the company itself without Court involvement.  Where the company is insolvent, the creditors have the pre-eminent role.  Liquidation can also be forced by way of a compulsory liquidation by order of Court.

The various insolvency procedures for persons and companies provide for a moratorium on enforcement.  This means that legal enforcement cannot be undertaken against the bankrupt person or insolvent company.  The claims must be made through the insolvency procedure.

Insolvency practitioners are regulated to a greater extent than in Ireland.  Many critical rolls under insolvency processes must be performed by an insolvency practitioner. There are duties on insolvency practitioners to carry out certain investigations in relation to why a company or business has failed.

The law on receiverships has been significantly reformed in the United Kingdom.  In the case of charges over companies assets entered before September 2003, the usual means of enforcement is by way of an administrative receiver.  This receiver takes control of a company for the benefit of the chargeholder but has certain wider duties.

In the case of post September 2003 charges over all of a company's assets, it is only possible to appoint an administrator.  An administrator has a wider range of duties and obligations than a receiver would have had. In particular, he must consider if it is possible to rescue the company.

Administration is the usual mechanism to facilitate company arrangements and reconstructions.  The administrator enjoys the benefit of a very wide moratorium in order to facilitate the formulation and implementation of the proposed arrangement.

Administration arrangements themselves are usually implemented by way of Company Voluntary Arrangements which are broadly similar to individual voluntary arrangements.  If they are accepted by 75% of each class of creditors then they are binding on all of the creditors. Creditors may apply to Court to set aside a proposed arrangement where they can show unfair prejudice.

Fixed charge receivers are mechanisms for enforcement of mortgages. See our guides on the Management and Enforcement of Loan and Security in England and Wales.

EU law has provided for cross border recognition of insolvencies throughout the European Union.  The country of the centre of main interests law is effectively binding throughout the European Union.  It is possible for a party or company to move its centre of main interests, even after insolvency events have occurred.

Insolvency in England and Wales

• Bankruptcy Overview
• Bankruptcy Adjudication
• Post Bankruptcy Procedure
• Bankrupt's Assets
• Bankruptcy Restrictions Duties and Termination
• Individual Voluntary Arrangements
• IVA Procedures
• Content of IVAs
• Company Solvent Liquidation
• Company Creditors Voluntary Liquidation
• Company Compulsory Liquidation
• Insolvency Moratorium
• Insolvency Investigations
• Receivers
• Administrative Receivers I
• Administrative Receivers II
• Fixed Charge Receivers
• Administration Overview
• Administration Initiation
• Administration Procedure
• Administration Moratorium and Realisation
• Administration Implementation and Exit
• Company Voluntary Arrangements I
• Company Voluntary Arrangements II
• Insolvency Implications for Mortgagor
• Cross border aspects of insolvency
• Insolvency Practitioners

Contact(s):
              Paul McMahon