Insolvency reforms
The Enterprise Act contains a number of measures that have modernised corporate insolvency law. The important reforms are outlined below.
Restrictions on the use of administrative receivership and a streamlining of the system of administration
The Act encourages the survival of viable companies where possible. The need for a court hearing has been significantly reduced, while stakeholders still receive adequate safeguards. Administration has become faster, cheaper, and more flexible.
The balance has been 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, benefit from this measure, which ensures that they are major beneficiaries.
The provision of a modern bankruptcy regime encouraging entrepreneurship
The Act provides 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 offers protection against abuse through a new Bankruptcy Restrictions Order system. Those that have abused creditors and the public are subject to restrictions for between 2 and 15 years.
The measures also entailed the removal of outdated restrictions, and the introduction of a general three year limit on the period in which a trustee may deal with an interest in a bankrupt's or former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 has been made more transparent and fee structures have been simplified. Changes to the Insolvency Services Account have meant that estates receive the maximum return on investment, which benefits many small firms.
