Insolvency Act 1986 Explained

Short Title:Insolvency Act 1986
Type:Act
Parliament:Parliament of the United Kingdom
Long Title:An 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
Statute Book Chapter:1986 c. 45
Territorial Extent:England and Wales; Scotland; Northern Ireland
Royal Assent:25 July 1986
Amends:Landlord and Tenant Act 1709
Status:Amended
Original Text:http://www.legislation.gov.uk/ukpga/1986/45/contents/enacted
Revised Text:http://www.legislation.gov.uk/ukpga/1986/45/contents

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.

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) 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

Insolvency of individuals – bankruptcy

Miscellaneous matters

Schedules

External links

Notes and References

  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
  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

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