Insolvency Act 1986

The Insolvency Act 1986 (c 45) is an Act of the Parliament of the United Kingdom that provides the legal platform for all matters relating to personal and corporate insolvency in the UK.

Insolvency Act 1986
Parliament of the United Kingdom
Long titleAn Act to consolidate the enactments relating to company insolvency and winding up (including the winding up of companies that are not insolvent, and of unregistered companies); enactments relating to the insolvency and bankruptcy of individuals; and other enactments bearing on those two subject matters, including the functions and qualification of insolvency practitioners, the public administration of insolvency, the penalisation and redress of malpractice and wrongdoing, and the avoidance of certain transactions at an undervalue
Citation1986 c 45
Territorial extent England and Wales; Scotland; Northern Ireland
Dates
Royal assent25 July 1986
Status: Amended
Text of statute as originally enacted
Revised text of statute as amended

History

The Insolvency Act 1986 followed the publication and most of the findings in the Cork Report, including the introduction of the Individual Voluntary Arrangement (IVA) and Company Voluntary Arrangement (CVA) procedures.

Elements of the Act were updated by the Enterprise Act 2002, which came into effect on 1 April 2004 and introduced amongst other things the popular "out-of-court" administration route,[1] and the allocation of a limited amount of funding released from assets, known as the "prescribed part", which could be made available to support ordinary unsecured creditors ahead of secured creditors. This limit was initially £600,000, but it was increased to £800,000 by the Insolvency Act 1986 (Prescribed Part) (Amendment) Order 2020 (SI 211/2020) on 6 April 2020 to maintain the real value of the limit.[2][3]

Those considering the main Act should also refer to the Insolvency Rules 1986 and numerous Regulations and other amending legislation since 1986, and also to the best practice which applies to the administration of formal insolvency matters set out in the Statements of Insolvency Practice (SIPs) [4] approved by the insolvency practitioner authorising bodies.

Further updates to the Act were made by the Corporate Insolvency and Governance Act 2020, which provided a moratorium for companies that were likely to become insolvent and gave additional reliefs for businesses that were adversely impacted by the COVID-19 pandemic.

Contents

The Insolvency Act 1986 essentially governs issues relating to personal bankruptcy and Individual Voluntary Arrangements and all administrative orders relating to company insolvency.

Companies winding up
  • Part I - Company Voluntary Arrangements
  • Part II - Administration Orders
  • Part III - Receivership (ss 22-72H)
    • Chapter I - Receivers and Managers (England and Wales)
    • Chapter II - Receivers (Scotland)
    • Chapter III - Receivers Powers in Great Britain as a whole
  • Part IV - Winding Up of Companies Registered Under the Companies Acts (ss 73-219)
    • Chapter I - Preliminary
    • Chapter II - Voluntary Winding Up (Introductory and General)
    • Chapter III - Members' Voluntary Winding Up (ss 91-96)
    • Chapter IV - Creditors' Voluntary Winding Up (ss 97-106)
    • Chapter V - Provisions Applying to both kinds of Winding up
    • Chapter VI - Winding Up by the Court (ss 117-162)
    • Chapter VII - Liquidators
    • Chapter VIII - Provisions of general application in winding up
    • Chapter IX - Dissolution of companies after winding up
    • Chapter X - Malpractice before and during Liquidation; Penalisation of companies and company officers; Investigations and prosecutions (ss 206-219). Section 213 lies within this part, and provides for individuals who are aware that business has been carried on with the intent to defraud the company's creditors to be called upon to contribute to the company’s assets.
  • Part V - Winding Up Unregistered Companies (ss 220-229)
  • Part VI - Miscellaneous Provisions applying to Companies which are Insolvent or in Liquidation
  • Part VII - Interpretation for first group of parts

Insolvency of individuals – bankruptcy
  • Part VIII - Individual Voluntary Arrangements
  • Part IX - Bankruptcy (ss 264-371)
  • Chapter I - Bankruptcy Petitions - Bankruptcy Orders
  • Chapter II - Protection of Bankrupt's Estate and Investigation of his Affairs
  • Chapter III - Trustees in Bankruptcy
  • Chapter IV - Administration by Trustee
  • Chapter V - Effect of Bankruptcy on certain rights, transactions etc.
  • Chapter VI - Bankruptcy Offences
  • Chapter VII - Powers of Court in Bankruptcy
  • Part X - Individual Insolvency: General Provisions
  • Part XI - Interpretation for second group of parts

Miscellaneous matters
  • Part XII - Preferential debts in company and individual insolvency
  • Part XIII - Insolvency Practitioners and their qualifications (ss 338-398)
  • Part XIV - Public Administration (ss 399-410)
  • Part XV - Subordinate Legislation
  • Part XVI - Provisions against debt avoidance (England and Wales Only)
  • Part XVII - Miscellaneous and General
  • Part XVIII - Interpretation
  • Part XIX - Final Provisions

Schedules

Notes
  1. Lyndon Norley, Kirkland & Ellis International LLP and Joseph Swanson and Peter Marshall, Houlihan Lokey (2008). A Practitioner's Guide to Corporate Restructuring. City & Financial Publishing, 1st edition ISBN 978-1-905121-31-1
  2. Eaton, A., Maximum prescribed part increased from £600,000 to 800,000, Burges Salmon, accessed 23 August 2023
  3. UK Legislation, Explanatory Memorandum to the Insolvency Act 1986 (Prescribed Part) (Amendment) Order 2020, prepared by the Department for Business, Energy and Industrial Strategy in conjunction with the Insolvency Service, accessed 23 August 2023
  4. Archived 10 March 2014 at the Wayback Machine
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