HiResOn 26 May 2015 new UK insolvency law changes take effect and all insolvency practitioners and stakeholders should be aware of these amended rules which apply from today onwards. Read on to make sure you are up to date!

The previous government pushed a number legislative changes through parliament before the General Election, which included changes to the Insolvency Act 1986 (“IA86”), brought about by The Small Business Enterprise and Employment Act 2015 (“SBEEA”) and the Deregulation Act 2015. Below is a summary of the changes that are now in effect! 


  • Extension of the term of administrator’s office by the creditors

Creditors can now agree an extension of the term of an administrators’ office by consent for a period of up to one year. Previously, only 6 months could be granted by creditor consent. This will be welcome to avoid the need to go to Court for an extension until potentially almost 2 years from appointment. This applies to all existing cases where no creditor extension has previously been agreed. 

  • Prescribed part distributions to unsecured creditors and moves to CVL

Administrators will no longer need the Court’s permission to make a prescribed part distribution to unsecured creditors. However, there is also a consequential amendment which prohibits entry to Creditors’ Voluntary Liquidation where the only distribution to unsecured creditors is a prescribed part distribution. So, Administrators will need to distribute whilst in Administration, or will have to incur the extra costs associated with a move to compulsory liquidation. An Administrator will still need permission of the Court to make a distribution (other than a prescribed part) to unsecured creditors.

  • The Appointment of Administrators

The presentation of a petition for winding up will no longer prohibit the appointment of an administrator by the company or its directors. This is provided the winding up petition was presented after the person proposing to make the administration appointment filed a notice of intention to appoint with the Court. This will not apply to a winding up petition made on public interest grounds or by the FCA/PRA.

  • Sales to connected persons – beware!

Whilst it requires secondary legislation to become effective, an enabling provision has now been inserted in the IA86 which states that an Administrator’s power to sell, hire out or dispose of property to connected persons could be curtailed by new regulations. Any such regulations could prohibit or contain conditions on any such sale. The Government has 5 years from today to pass any regulations on this one and the insolvency profession are hoping that this power will never be used.

  • Scotland – attachment of floating charges

Applicable only to Scotland, a new section confirms that where the Administrator is making a distribution to unsecured creditors and obtains the Court’s permission, a floating charge will crystallise when the Court gives permission. This therefore avoids the need to put the company into liquidation in order to crystallise the charge in cases where Para 115(2) of Schedule B1 IA86 does not apply.

Liquidation and Bankruptcy

  • Removing requirements to seek sanction

From now on, it will no longer be necessary for liquidators and trustees to obtain sanction to exercise the powers set out in Schedule 4, Schedule 5 and section 314(2) IA86.

  • Voluntary winding up: progress reports

A progress report must now be issued in a voluntary liquidation if the liquidator changes within the first year.

Individual Voluntary Arrangements

Two provisions are now in force:

(i)         Any challenge to an IVA must now be brought within 28 days of the meeting called to consider the IVA proposal.

(ii)        Fast-track IVAs are now abolished.


The above rules can be seen as cutting down the ‘red-tape’ and/or freeing up the Court’s time from dealing with these matters, such as the ability to extend administration for 12 months by creditor consent, or providing clarification of the law. Whilst generally welcome, there have been some concerns raised in the insolvency profession about, for example, the prohibition on moving to voluntary liquidation where unsecured creditors are only receiving a prescribed-part distribution.

There are a significant number of other sections of SBEEA and the Deregulation Act which have come into law but are not yet effective as they require secondary legislation to enact (too many for this blog to deal with here, but watch this space!). Commentary suggests that is not likely to occur until the new (and much awaited) Insolvency Rules come into effect, but practitioners should keep abreast of developments in the meantime.