Insolvency Bill [H.L.] - continued        House of Lords

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  S C H E D U L E S
 
 

 
 
 
SCHEDULE 1
 
  MORATORIUM WHERE DIRECTORS PROPOSE VOLUNTARY ARRANGEMENT
 
  AMENDMENTS OF THE INSOLVENCY ACT 1986
     1. The Insolvency Act 1986 is amended as provided in Part I of this Schedule.
 
     2. After section 1 there is inserted-
 
 
"Moratorium.     1A. - (1) Where the directors of an eligible company intend to make a proposal for a voluntary arrangement, they may apply for a moratorium for the company.
 
    (2) The provisions of Schedule A1 to this Act have effect with respect to-
 
 
    (a) companies eligible for a moratorium under this section,
 
    (b) the procedure for obtaining such a moratorium,
 
    (c) the effects of such a moratorium, and
 
    (d) the procedure applicable (in place of sections 2 to 6 and 7) in relation to the approval and implementation of a voluntary arrangement where such a moratorium is in force."
     3. In section 2(1) (procedure where nominee is not the liquidator or administrator), at the end there is added "and the directors do not propose to apply for a moratorium under section 1A for the company".
 
     4. Before Schedule 1 there is inserted-
 
 
 
 

 
 
 
"SCHEDULE A1
 
MORATORIUM WHERE DIRECTORS PROPOSE VOLUNTARY ARRANGEMENT
  PART I
  INTRODUCTORY
 
Interpretation
     1. In this Schedule-
 
 
    "the beginning of the moratorium" has the meaning given by paragraph 8(1),
 
    "the date of filing" means the date on which the documents for the time being referred to in paragraph 7(1) are filed or lodged with the court,
 
    "hire-purchase agreement" includes a conditional sale agreement, a chattel leasing agreement and a retention of title agreement,
 
    "market contract" and "market charge" have the meanings given by Part VII of the Companies Act 1989,
 
    "moratorium" means a moratorium under section 1A,
 
    "the nominee" includes any person for the time being carrying out the functions of a nominee under this Schedule,
 
    "the settlement finality regulations" means the Financial Markets and Insolvency (Settlement Finality) Regulations 1999.
 
Eligible companies
     2. - (1) A company is eligible for a moratorium if it meets the requirements of paragraph 3, unless-
 
 
    (a) it is excluded from being eligible by virtue of paragraph 4, or
 
    (b) it falls within sub-paragraph (2).
      (2) A company falls within this sub-paragraph if-
 
 
    (a) it is an insurance company within the meaning of the Insurance Companies Act 1982,
 
    (b) it is an authorised institution or former authorised institution within the meaning of the Banking Act 1987,
 
    (c) it is a party to a market contract or any of its property is subject to a market charge, or
 
    (d) it is a participant (within the meaning of the settlement finality regulations) or any of its property is subject to a collateral security charge (within the meaning of those regulations).
     3. - (1) A company meets the requirements of this paragraph if the qualifying conditions are met-
 
 
    (a) in the year ending with the date of filing, or
 
    (b) in the financial year of the company which ended last before that date.
      (2) For the purposes of sub-paragraph (1)-
 
 
    (a) the qualifying conditions are met by a company in a period if, in that period, it satisfies two or more of the requirements for being a small company specified for the time being in section 247(3) of the Companies Act 1985, and
 
    (b) a company's financial year is to be determined in accordance with that Act.
      (3) Subsections (4), (5) and (6) of section 247 of that Act apply for the purposes of this paragraph as they apply for the purposes of that section.
 
     4. - (1) A company is excluded from being eligible for a moratorium if, on the date of filing-
 
 
    (a) an administration order is in force in relation to the company,
 
    (b) the company is being wound up,
 
    (c) there is an administrative receiver of the company,
 
    (d) a voluntary arrangement has effect in relation to the company,
 
    (e) there is a provisional liquidator of the company,
 
    (f) a moratorium has been in force for the company at any time during the period of 12 months ending with the date of filing and-
 
      (i) no voluntary arrangement had effect at the time at which the moratorium came to an end, or
 
      (ii) a voluntary arrangement which had effect at any time in that period has come to an end prematurely, or
 
    (g) a voluntary arrangement in relation to the company which had effect in pursuance of a proposal under section 1(3) has come to an end prematurely and, during the period of 12 months ending with the date of filing, an order under section 5(3)(a) has been made.
      (2) Sub-paragraph (1)(b) does not apply to a company which, by reason of a winding-up order made after the date of filing, is treated as being wound up on that date.
 
     5. The Secretary of State may by regulations modify the qualifications for eligibility of a company for a moratorium.
 
  PART II
  OBTAINING A MORATORIUM
 
Nominee's statement
     6. - (1) Where the directors of a company propose to apply for a moratorium, they shall submit to the nominee-
 
 
    (a) a document setting out the terms of the proposed voluntary arrangement,
 
    (b) a statement of the company's affairs containing-
 
      (i) such particulars of its creditors and of its debts and other liabilities and of its assets as may be prescribed, and
 
      (ii) such other information as may be prescribed, and
 
    (c) any other information necessary to enable the nominee to comply with sub-paragraph (2) which he requests from them.
      (2) The nominee shall submit to the directors a statement in the prescribed form indicating whether or not, in his opinion-
 
 
    (a) the proposed voluntary arrangement has a reasonable prospect of being approved and implemented,
 
    (b) the company is likely to have sufficient funds available to it during the proposed moratorium to enable it to carry on its business, and
 
    (c) meetings of the company and its creditors should be summoned to consider the proposed voluntary arrangement.
      (3) In forming his opinion on the matters mentioned in sub-paragraph (2), the nominee is entitled to rely on the information submitted to him under sub-paragraph (1) unless he has reason to doubt its accuracy.
 
      (4) The reference in sub-paragraph (2)(b) to the company's business is to that business as the company proposes to carry it on during the moratorium.
 
 
Documents to be submitted to court
     7. - (1) To obtain a moratorium the directors of a company must file (in Scotland, lodge) with the court-
 
 
    (a) a document setting out the terms of the proposed voluntary arrangement,
 
    (b) a statement of the company's affairs containing-
 
      (i) such particulars of its creditors and of its debts and other liabilities and of its assets as may be prescribed, and
 
      (ii) such other information as may be prescribed,
 
    (c) a statement that the company is eligible for a moratorium,
 
    (d) a statement from the nominee that he has given his consent to act, and
 
    (e) a statement from the nominee that, in his opinion-
 
      (i) the proposed voluntary arrangement has a reasonable prospect of being approved and implemented,
 
      (ii) the company is likely to have sufficient funds available to it during the proposed moratorium to enable it to carry on its business, and
 
      (iii) meetings of the company and its creditors should be summoned to consider the proposed voluntary arrangement.
      (2) Each of the statements mentioned in sub-paragraph (1)(b) to (e), except so far as it contains the particulars referred to in paragraph (b)(i), must be in the prescribed form.
 
      (3) The reference in sub-paragraph (1)(e)(ii) to the company's business is to that business as the company proposes to carry it on during the moratorium.
 
      (4) The Secretary of State may by regulations modify the requirements of this paragraph as to the documents required to be filed (in Scotland, lodged) with the court in order to obtain a moratorium.
 
 
Duration of moratorium
     8. - (1) A moratorium comes into force when the documents for the time being referred to in paragraph 7(1) are filed or lodged with the court and references in this Schedule to "the beginning of the moratorium" shall be construed accordingly.
 
      (2) A moratorium ends at the end of the day on which the meetings summoned under paragraph 27(1) are first held (or, if the meetings are held on different days, the later of those days), unless it is extended under paragraph 30.
 
      (3) If either of those meetings has not first met before the end of the period of 28 days beginning with the day on which the moratorium comes into force, the moratorium ends at the end of the last day of that period.
 
      (4) If the moratorium is extended (or further extended) under paragraph 30, it ends at the end of the day to which it is extended (or further extended).
 
      (5) Sub-paragraphs (2) to (4) do not apply if the moratorium comes to an end before the time concerned by virtue of-
 
 
    (a) paragraph 23(4) (effect of withdrawal by nominee of consent to act),
 
    (b) an order under paragraph 24(3), 25(3) or 38 (challenge of actions of nominee or directors), or
 
    (c) a decision of one or both of the meetings summoned under paragraph 27.
      (6) If the moratorium has not previously come to an end in accordance with sub-paragraphs (2) to (5), it ends at the end of the day on which a decision under paragraph 29 to approve a voluntary arrangement takes effect under paragraph 34.
 
      (7) The Secretary of State may by order increase or reduce the period for the time being specified in sub-paragraph (3).
 
 
Notification of beginning of moratorium
     9. - (1) When a moratorium comes into force, the directors shall notify the nominee of that fact forthwith.
 
      (2) If the directors without reasonable excuse fail to comply with sub-paragraph (1), each of them is liable to imprisonment or a fine, or both.
 
     10. - (1) When a moratorium comes into force, the nominee shall, in accordance with the rules-
 
 
    (a) advertise that fact forthwith, and
 
    (b) notify the registrar of companies, the company and any petitioning creditor of the company of whose claim he is aware of that fact.
      (2) In sub-paragraph (1)(b) "petitioning creditor" means a creditor by whom a winding-up petition has been presented before the beginning of the moratorium, as long as the petition has not been dismissed or withdrawn.
 
      (3) If the nominee without reasonable excuse fails to comply with sub-paragraph (1)(a) or (b), he is liable to a fine.
 
 
Notification of end of moratorium
     11. - (1) When a moratorium comes to an end, the nominee shall, in accordance with the rules-
 
 
    (a) advertise that fact forthwith, and
 
    (b) notify the court, the registrar of companies, the company and any creditor of the company of whose claim he is aware of that fact.
      (2) If the nominee without reasonable excuse fails to comply with sub-paragraph (1)(a) or (b), he is liable to a fine.
 
  PART III
  EFFECTS OF MORATORIUM
 
Effect on creditors, etc.
     12. - (1) During the period for which a moratorium is in force for a company-
 
 
    (a) no petition may be presented for the winding up of the company,
 
    (b) no meeting of the company may be called or requisitioned except with the consent of the nominee or the leave of the court and subject (where the court gives leave) to such terms as the court may impose,
 
    (c) no resolution may be passed or order made for the winding up of the company,
 
    (d) no petition for an administration order in relation to the company may be presented,
 
    (e) no administrative receiver of the company may be appointed,
 
    (f) no other steps may be taken to enforce any security over the company's property, or to repossess goods in the company's possession under any hire-purchase agreement, except with the leave of the court and subject to such terms as the court may impose, and
 
    (g) no other proceedings and no execution or other legal process may be commenced or continued, and no distress may be levied, against the company or its property except with the leave of the court and subject to such terms as the court may impose.
      (2) Where a petition, other than an excepted petition, for the winding up of the company has been presented before the beginning of the moratorium, section 127 shall not apply in relation to any disposition of property, transfer of shares or alteration in status made during the moratorium or at a time mentioned in paragraph 35(5)(a).
 
      (3) In the application of sub-paragraph (1)(g) to Scotland, the reference to execution being commenced or continued includes a reference to diligence being carried out or continued, and the reference to distress being levied is omitted.
 
      (4) Paragraph (a) of sub-paragraph (1) does not apply to an excepted petition and, where such a petition has been presented before the beginning of the moratorium or is presented during the moratorium, paragraphs (b) and (c) of that sub-paragraph do not apply in relation to proceedings on the petition.
 
      (5) For the purposes of this paragraph, "excepted petition" means a petition under-
 
 
    (a) section 124A of this Act,
 
    (b) section 72 of the Financial Services Act 1986 on the ground mentioned in subsection (1)(b) of that section, or
 
    (c) section 92 of the Banking Act 1987 on the ground mentioned in subsection (1)(b) of that section.
     13. Security granted by a company at a time when a moratorium is in force in relation to the company may only be enforced if, at that time, there were reasonable grounds for believing that it would benefit the company.
 
 
Effect on company
     14. - (1) Sub-paragraphs (2) and (3) and paragraphs 15 to 21 apply in relation to a company for which a moratorium is in force.
 
      (2) The company may not-
 
 
    (a) enter into a market contract, or
 
    (b) give a transfer order (within the meaning of the settlement finality regulations).
      (3) The company may not grant-
 
 
    (a) a market charge, or
 
    (b) a collateral security charge (within the meaning of those regulations).
 
Company invoices, etc.
     15. - (1) Every invoice, order for goods or business letter which-
 
 
    (a) is issued by or on behalf of the company, and
 
    (b) on or in which the company's name appears,
  shall also contain the nominee's name and a statement that the moratorium is in force for the company.
 
      (2) If default is made in complying with sub-paragraph (1), the company and (subject to sub-paragraph (3)) any officer of the company is liable to a fine.
 
      (3) An officer of the company is only liable under sub-paragraph (2) if, without reasonable excuse, he authorises or permits the default.
 
 
Obtaining credit during moratorium
     16. - (1) The company may not obtain credit to the extent of £250 or more from a person who has not been informed that a moratorium is in force in relation to the company.
 
      (2) The reference to the company obtaining credit includes the following cases-
 
 
    (a) where goods are bailed (in Scotland, hired) to the company under a hire-purchase agreement, or agreed to be sold to the company under a conditional sale agreement, and
 
    (b) where the company is paid in advance (whether in money or otherwise) for the supply of goods or services.
      (3) Where the company obtains credit in contravention of sub-paragraph (1)-
 
 
    (a) the company is liable to a fine, and
 
    (b) if any officer of the company knowingly and wilfully authorised or permitted the contravention, he is liable to imprisonment or a fine, or both.
      (4) The money sum specified in sub-paragraph (1) is subject to increase or reduction by order under section 417A in Part XV.
 
 
Disposals and payments
     17. - (1) Subject to sub-paragraph (2), the company may only dispose of any of its property if-
 
 
    (a) there are reasonable grounds for believing that the disposal will benefit the company, and
 
    (b) the disposal is approved by the committee established under paragraph 33(1) or, where there is no such committee, by the nominee.
      (2) Sub-paragraph (1) does not apply to a disposal made in the ordinary way of the company's business.
 
      (3) If the company makes a disposal in contravention of sub-paragraph (1)-
 
 
    (a) the company is liable to a fine, and
 
    (b) if any officer of the company authorised or permitted the contravention, without reasonable excuse, he is liable to imprisonment or a fine, or both.
     18. - (1) Subject to sub-paragraph (2), the company may only make any payment in respect of any debt or other liability of the company in existence before the beginning of the moratorium if-
 
 
    (a) there are reasonable grounds for believing that the payment will benefit the company, and
 
    (b) the payment is approved by the committee established under paragraph 33(1) or, where there is no such committee, by the nominee.
      (2) Sub-paragraph (1) does not apply to a payment required by paragraph 19(6).
 
      (3) If the company makes a payment in contravention of sub-paragraph (1)-
 
 
    (a) the company is liable to a fine, and
 
    (b) if any officer of the company authorised or permitted the contravention, without reasonable excuse, he is liable to imprisonment or a fine, or both.
 
Disposal of charged property, etc.
     19. - (1) This paragraph applies where-
 
 
    (a) any property of the company is subject to a security, or
 
    (b) any goods are in the possession of the company under a hire-purchase agreement.
      (2) If the holder of the security consents, or the court gives leave, the company may dispose of the property as if it were not subject to the security.
 
      (3) If the owner of the goods consents, or the court gives leave, the company may dispose of the goods as if all rights of the owner under the hire-purchase agreement were vested in the company.
 
      (4) Where property subject to a security which, as created, was a floating charge is disposed of under sub-paragraph (2), the holder of the security has the same priority in respect of any property of the company directly or indirectly representing the property disposed of as he would have had in respect of the property subject to the security.
 
      (5) Sub-paragraph (6) applies to the disposal under sub-paragraph (2) or (as the case may be) sub-paragraph (3) of-
 
 
    (a) any property subject to a security other than a security which, as created, was a floating charge, or
 
    (b) any goods in the possession of the company under a hire-purchase agreement.
      (6) It shall be a condition of any consent or leave under sub-paragraph (2) or (as the case may be) sub-paragraph (3) that-
 
 
    (a) the net proceeds of the disposal, and
 
    (b) where those proceeds are less than such amount as may be agreed, or determined by the court, to be the net amount which would be realised on a sale of the property or goods in the open market by a willing vendor, such sums as may be required to make good the deficiency,
  shall be applied towards discharging the sums secured by the security or payable under the hire-purchase agreement.
 
      (7) Where a condition imposed in pursuance of sub-paragraph (6) relates to two or more securities, that condition requires-
 
 
    (a) the net proceeds of the disposal, and
 
    (b) where paragraph (b) of sub-paragraph (6) applies, the sums mentioned in that paragraph,
  to be applied towards discharging the sums secured by those securities in the order of their priorities.
 
      (8) Where the court gives leave for a disposal under sub-paragraph (2) or (3), the directors shall, within 14 days after leave is given, send an office copy of the order giving leave to the registrar of companies.
 
      (9) If the directors without reasonable excuse fail to comply with sub-paragraph (8), they are liable to a fine.
 
     20. - (1) Where property is disposed of under paragraph 19 in its application to Scotland, the company shall grant to the disponee an appropriate document of transfer or conveyance of the property, and
 
 
    (a) that document, or
 
    (b) where any recording, intimation or registration of the document is a legal requirement for completion of title to the property, that recording, intimation or registration,
  has the effect of disencumbering the property of, or (as the case may be) freeing the property from, the security.
 
      (2) Where goods in the possession of the company under a hire-purchase agreement are disposed of under paragraph 19 in its application to Scotland, the disposal has the effect of extinguishing, as against the disponee, all rights of the owner of the goods under the agreement.
 
     21. - (1) If the company-
 
 
    (a) disposes of any property or goods of a description mentioned in paragraph 19(1) other than in accordance with that paragraph, or
 
    (b) fails to comply with any requirement imposed by paragraph 19 or 20,
  it is liable to a fine.
 
      (2) If any officer of the company, without reasonable excuse, authorises or permits any such disposal or failure to comply, he is liable to imprisonment or a fine, or both.
 
  PART IV
  NOMINEES
 
Monitoring of company's activities
     22. - (1) During a moratorium, the nominee shall monitor the company's affairs for the purpose of forming an opinion as to whether-
 
 
    (a) the proposed voluntary arrangement or, if he has received notice of proposed modifications under paragraph 29(7), the proposed arrangement with those modifications has a reasonable prospect of being approved and implemented, and
 
    (b) the company is likely to have sufficient funds available to it during the remainder of the moratorium to enable it to continue to carry on its business.
      (2) The directors shall submit to the nominee any information necessary to enable him to comply with sub-paragraph (1) which he requests from them.
 
      (3) In forming his opinion on the matters mentioned in sub-paragraph (1), the nominee is entitled to rely on the information submitted to him under sub-paragraph (2) unless he has reason to doubt its accuracy.
 
      (4) The reference in sub-paragraph (1)(b) to the company's business is to that business as the company proposes to carry it on during the remainder of the moratorium.
 
 
Withdrawal of consent to act
     23. - (1) The nominee may only withdraw his consent to act in the circumstances mentioned in this paragraph.
 
      (2) The nominee must withdraw his consent to act if, at any time during a moratorium-
 
 
    (a) he forms the opinion that-
 
      (i) the proposed voluntary arrangement or, if he has received notice of proposed modifications under paragraph 29(7), the proposed arrangement with those modifications no longer has a reasonable prospect of being approved or implemented, or
 
      (ii) the company will not have sufficient funds available to it during the remainder of the moratorium to enable it to continue to carry on its business,
 
    (b) he becomes aware that, on the date of filing, the company was not eligible for a moratorium, or
 
    (c) the directors fail to comply with their duty under paragraph 22(2).
      (3) The reference in sub-paragraph (2)(a)(ii) to the company's business is to that business as the company proposes to carry it on during the remainder of the moratorium.
 
      (4) If the nominee withdraws his consent to act, the moratorium comes to an end.
 
      (5) If the nominee withdraws his consent to act he must, in accordance with the rules, notify the court, the registrar of companies, the company and any creditor of the company of whose claim he is aware of his withdrawal and the reason for it.
 
      (6) If the nominee without reasonable excuse fails to comply with sub-paragraph (5), he is liable to a fine.
 
 
Challenge of nominee's actions, etc.
     24. - (1) If any creditor, director or member of the company, or any other person affected by a moratorium, is dissatisfied by any act, omission or decision of the nominee during the moratorium, he may apply to the court.
 
      (2) An application under sub-paragraph (1) may be made during the moratorium or after it has ended.
 
      (3) On an application under sub-paragraph (1) the court may-
 
 
    (a) confirm, reverse or modify any act or decision of the nominee,
 
    (b) give him directions, or
 
    (c) make such other order as it thinks fit.
      (4) An order under sub-paragraph (3) may (among other things) bring the moratorium to an end and make such consequential provision as the court thinks fit.
 
     25. - (1) Where there are reasonable grounds for believing that-
 
 
    (a) as a result of any act, omission or decision of the nominee during the moratorium, the company has suffered loss, but
 
    (b) the company does not intend to pursue any claim it may have against the nominee,
  any creditor of the company may apply to the court.
 
      (2) An application under sub-paragraph (1) may be made during the moratorium or after it has ended.
 
      (3) On an application under sub-paragraph (1) the court may-
 
 
    (a) order the company to pursue any claim against the nominee,
 
    (b) authorise any creditor to pursue such a claim in the name of the company, or
 
    (c) make such other order with respect to such a claim as it thinks fit,
  unless the court is satisfied that the act, omission or decision of the nominee was in all the circumstances reasonable.
 
      (4) An order under sub-paragraph (3) may (among other things)-
 
 
    (a) impose conditions on any authority given to pursue a claim,
 
    (b) direct the company to assist in the pursuit of a claim,
 
    (c) make directions with respect to the distribution of anything received as a result of the pursuit of a claim,
 
    (d) bring the moratorium to an end and make such consequential provision as the court thinks fit.
      (5) On an application under sub-paragraph (1) the court shall have regard to the interests of the members and creditors of the company generally.
 
 
Replacement of nominee by court
     26. - (1) The court may-
 
 
    (a) on an application made by the directors in a case where the nominee has failed to comply with any duty imposed on him under this Schedule or has died, or
 
    (b) on an application made by the directors or the nominee in a case where it is impracticable or inappropriate for the nominee to continue to act as such,
  direct that the nominee be replaced as such by another person qualified to act as an insolvency practitioner, or authorised to act as nominee, in relation to the voluntary arrangement.
 
      (2) A person may only be appointed as a replacement nominee under this paragraph if he submits to the court a statement indicating his consent to act.
 
  PART V
  CONSIDERATION AND IMPLEMENTATION OF VOLUNTARY ARRANGEMENT
 
Summoning of meetings
     27. - (1) Where a moratorium is in force, the nominee shall summon meetings of the company and its creditors for such a time, date and place as he thinks fit.
 
      (2) The persons to be summoned to a creditors' meeting under this paragraph are every creditor of the company of whose claim the nominee is aware.
 
 
Conduct of meetings
     28. - (1) Subject to the provisions of paragraphs 29 to 33, the meetings summoned under paragraph 27 shall be conducted in accordance with the rules.
 
      (2) A meeting so summoned may resolve that it be adjourned (or further adjourned).
 
      (3) After the conclusion of either meeting in accordance with the rules, the chairman of the meeting shall report the result of the meeting to the court, and, immediately after reporting to the court, shall give notice of the result of the meeting to such persons as may be prescribed.
 
 
Approval of voluntary arrangement
     29. - (1) The meetings summoned under paragraph 27 shall decide whether to approve the proposed voluntary arrangement (with or without modifications).
 
      (2) The modifications may include one conferring the functions proposed to be conferred on the nominee on another person qualified to act as an insolvency practitioner, or authorised to act as nominee, in relation to the voluntary arrangement.
 
      (3) The modifications shall not include one by virtue of which the proposal ceases to be a proposal such as is mentioned in section 1.
 
      (4) A meeting summoned under paragraph 27 shall not approve any proposal or modification which affects the right of a secured creditor of the company to enforce his security, except with the concurrence of the creditor concerned.
 
      (5) Subject to sub-paragraph (6), a meeting so summoned shall not approve any proposal or modification under which-
 
 
    (a) any preferential debt of the company is to be paid otherwise than in priority to such of its debts as are not preferential debts, or
 
    (b) a preferential creditor of the company is to be paid an amount in respect of a preferential debt that bears to that debt a smaller proportion than is borne to another preferential debt by the amount that is to be paid in respect of that other debt.
      (6) The meeting may approve such a proposal or modification with the concurrence of the preferential creditor concerned.
 
      (7) The directors of the company may, before the beginning of the period of seven days which ends with the meetings (or either of them) summoned under paragraph 27 being held, give notice to the nominee of any modifications of the proposal for which the directors intend to seek the approval of those meetings.
 
      (8) References in this paragraph to preferential debts and preferential creditors are to be read in accordance with section 386 in Part XII of this Act.
 
 
Extension of moratorium
     30. - (1) Subject to sub-paragraph (2), a meeting summoned under paragraph 27 which resolves that it be adjourned (or further adjourned) may resolve that the moratorium be extended (or further extended), with or without conditions.
 
      (2) The moratorium may not be extended (or further extended) to a day later than the end of the period of two months which begins-
 
 
    (a) where both meetings summoned under paragraph 27 are first held on the same day, with that day,
 
    (b) in any other case, with the day on which the later of those meetings is first held.
      (3) At any meeting where it is proposed to extend (or further extend) the moratorium, before a decision is taken with respect to that proposal, the nominee shall inform the meeting-
 
 
    (a) of what he has done in order to comply with his duty under paragraph 22 and the cost of his actions for the company, and
 
    (b) of what he intends to do to continue to comply with that duty if the moratorium is extended (or further extended) and the expected cost of his actions for the company.
      (4) Where, in accordance with sub-paragraph (3)(b), the nominee informs a meeting of the expected cost of his intended actions, the meeting shall resolve whether or not to approve that expected cost.
 
      (5) If a decision not to approve the expected cost of the nominee's intended actions has effect under paragraph 34, the moratorium comes to an end.
 
      (6) A meeting may resolve that a moratorium which has been extended (or further extended) be brought to an end before the end of the period of the extension (or further extension).
 
      (7) The Secretary of State may by order increase or reduce the period for the time being specified in sub-paragraph (2).
 
     31. - (1) The conditions which may be imposed when a moratorium is extended (or further extended) include a requirement that the nominee be replaced as such by another person qualified to act as an insolvency practitioner, or authorised to act as nominee, in relation to the voluntary arrangement.
 
      (2) A person may only be appointed as a replacement nominee by virtue of sub-paragraph (1) if he submits to the court a statement indicating his consent to act.
 
      (3) At any meeting where it is proposed to appoint a replacement nominee as a condition of extending (or further extending) the moratorium-
 
 
    (a) the duty imposed by paragraph 30(3)(b) on the nominee shall instead be imposed on the person proposed as the replacement nominee, and
 
    (b) paragraphs 30(4) and (5) and 34(1)(e) apply as if the references to the nominee were to that person.
     32. - (1) If a decision to extend, or further extend, the moratorium takes effect under paragraph 34, the nominee shall, in accordance with the rules, notify the registrar of companies and the court.
 
      (2) If the moratorium is extended, or further extended, by virtue of an order under paragraph 34(5), the nominee shall, in accordance with the rules, send an office copy of the order to the registrar of companies.
 
      (3) If the nominee without reasonable excuse fails to comply with this paragraph, he is liable to a fine.
 
 
Moratorium committee
     33. - (1) A meeting summoned under paragraph 27 which resolves that the moratorium be extended (or further extended) may, with the consent of the nominee, resolve that a committee be established to exercise the functions conferred on it by the meeting.
 
      (2) The meeting may not so resolve unless it has approved an estimate of the expenses to be incurred by the committee in the exercise of the proposed functions.
 
      (3) Any expenses, not exceeding the amount of the estimate, incurred by the committee in the exercise of its functions shall be reimbursed by the nominee.
 
      (4) The committee shall cease to exist when the moratorium comes to an end.
 
 
Effectiveness of decisions
     34. - (1) Sub-paragraph (2) applies to references to one of the following decisions having effect, that is, a decision, under paragraph 29, 30 or 33, with respect to-
 
 
    (a) the approval of a proposed voluntary arrangement,
 
    (b) the extension (or further extension) of a moratorium,
 
    (c) the bringing of a moratorium to an end,
 
    (d) the establishment of a committee, or
 
    (e) the approval of the expected cost of a nominee's intended actions.
      (2) The decision has effect if, in accordance with the rules-
 
 
    (a) it has been taken by both meetings summoned under paragraph 27, or
 
    (b) (subject to any order made under sub-paragraph (5)) it has been taken by the creditors' meeting summoned under that paragraph.
      (3) If a decision taken by the creditors' meeting under any of paragraphs 29, 30 or 33 with respect to any of the matters mentioned in sub-paragraph (1) differs from one so taken by the company meeting with respect to that matter, a member of the company may apply to the court.
 
      (4) An application under sub-paragraph (3) may be made during the moratorium or after it has ended.
 
      (5) On an application under sub-paragraph (3), the court may-
 
 
    (a) order the decision of the company meeting to have effect instead of the decision of the creditors' meeting, or
 
    (b) make such other order as it thinks fit.
 
Effect of approval of voluntary arrangement
     35. - (1) This paragraph applies where a decision approving a voluntary arrangement has effect under paragraph 34.
 
      (2) The approved voluntary arrangement-
 
 
    (a) takes effect as if made by the company at the creditors' meeting, and
 
    (b) binds every person who in accordance with the rules-
 
      (i) was entitled to vote at that meeting (whether or not he was present or represented at it), or
 
      (ii) would have been so entitled if he had had notice of it,
 
    as if he were a party to the voluntary arrangement.
      (3) If-
 
 
    (a) when the arrangement ceases to have effect any dividend payable under the arrangement to a person bound by virtue of sub-paragraph (2)(b)(ii) has not been paid, and
 
    (b) the arrangement did not come to an end prematurely,
  the company shall at that time become liable to pay to that person an amount equal to the amount of the dividend.
 
      (4) Where a petition for the winding up of the company, other than an excepted petition within the meaning of paragraph 12, was presented before the beginning of the moratorium, the court shall dismiss the petition.
 
      (5) The court shall not dismiss a petition under sub-paragraph (4)-
 
 
    (a) at any time before the end of the period of 28 days beginning with the first day on which each of the reports of the meetings required by paragraph 28(3) has been made to the court, or
 
    (b) at any time when an application under paragraph 36 or an appeal in respect of such an application is pending, or at any time in the period within which such an appeal may be brought.
 
Challenge of decisions
     36. - (1) Subject to the following provisions of this paragraph, any of the persons mentioned in sub-paragraph (2) may apply to the court on one or both of the following grounds-
 
 
    (a) that a voluntary arrangement approved at one or both of the meetings summoned under paragraph 27 and which has taken effect unfairly prejudices the interests of a creditor, member or contributory of the company,
 
    (b) that there has been some material irregularity at or in relation to either of those meetings.
      (2) The persons who may apply under this paragraph are-
 
 
    (a) a person entitled, in accordance with the rules, to vote at either of the meetings,
 
    (b) a person who would have been entitled, in accordance with the rules, to vote at the creditors' meeting if he had had notice of it, and
 
    (c) the nominee.
      (3) An application under this paragraph shall not be made-
 
 
    (a) after the end of the period of 28 days beginning with the first day on which each of the reports required by paragraph 28(3) has been made to the court, or
 
    (b) in the case of a person who was not given notice of the creditors' meeting, after the end of the period of 28 days beginning with the day on which he became aware that the meeting had taken place,
  but (subject to that) an application made by a person within sub-paragraph (2)(b) on the ground that the arrangement prejudices his interests may be made after the arrangement has ceased to have effect, unless it came to an end prematurely.
 
      (4) Where on an application under this paragraph the court is satisfied as to either of the grounds mentioned in sub-paragraph (1), it may do any of the following-
 
 
    (a) revoke or suspend-
 
      (i) any decision approving the voluntary arrangement which has effect under paragraph 34, or
 
      (ii) in a case falling within sub-paragraph (1)(b), any decision taken by the meeting in question which has effect under that paragraph,
 
    (b) give a direction to any person-
 
      (i) for the summoning of further meetings to consider any revised proposal for a voluntary arrangement which the directors may make, or
 
      (ii) in a case falling within sub-paragraph (1)(b), for the summoning of a further company or (as the case may be) creditors' meeting to reconsider the original proposal.
      (5) Where at any time after giving a direction under sub-paragraph (4)(b)(i) the court is satisfied that the directors do not intend to submit a revised proposal, the court shall revoke the direction and revoke or suspend any decision approving the voluntary arrangement which has effect under paragraph 30.
 
      (6) Where the court gives a direction under sub-paragraph (4)(b), it may also give a direction continuing or, as the case may require, renewing, for such period as may be specified in the direction, the effect of the moratorium.
 
      (7) Sub-paragraph (8) applies in a case where the court, on an application under this paragraph-
 
 
    (a) gives a direction under sub-paragraph (4)(b), or
 
    (b) revokes or suspends a decision under sub-paragraph (4)(a) or (5).
      (8) In such a case, the court may give such supplemental directions as it thinks fit and, in particular, directions with respect to-
 
 
    (a) things done under the voluntary arrangement since it took effect, and
 
    (b) such things done since that time as could not have been done if a moratorium had been in force in relation to the company when they were done.
      (9) Except in pursuance of the preceding provisions of this paragraph, a decision taken at a meeting summoned under paragraph 27 is not invalidated by any irregularity at or in relation to the meeting.
 
 
Implementation of voluntary arrangement
     37. - (1) This paragraph applies where a voluntary arrangement approved by one or both of the meetings summoned under paragraph 27 has taken effect.
 
      (2) The person who is for the time being carrying out in relation to the voluntary arrangement the functions conferred-
 
 
    (a) by virtue of the approval of the arrangement, on the nominee, or
 
    (b) by virtue of paragraph 29(2), on a person other than the nominee,
  shall be known as the supervisor of the voluntary arrangement.
 
      (3) If any of the company's creditors or any other person is dissatisfied by any act, omission or decision of the supervisor, he may apply to the court.
 
      (4) On an application under sub-paragraph (3) the court may-
 
 
    (a) confirm, reverse or modify any act or decision of the supervisor,
 
    (b) give him directions, or
 
    (c) make such other order as it thinks fit.
      (5) The supervisor-
 
 
    (a) may apply to the court for directions in relation to any particular matter arising under the voluntary arrangement, and
 
    (b) is included among the persons who may apply to the court for the winding up of the company or for an administration order to be made in relation to it.
      (6) The court may, whenever-
 
 
    (a) it is expedient to appoint a person to carry out the functions of the supervisor, and
 
    (b) it is inexpedient, difficult or impracticable for an appointment to be made without the assistance of the court,
  make an order appointing a person who is qualified to act as an insolvency practitioner, or authorised to act as supervisor, in relation to the voluntary arrangement, either in substitution for the existing supervisor or to fill a vacancy.
 
      (7) The power conferred by sub-paragraph (6) is exercisable so as to increase the number of persons exercising the functions of supervisor or, where there is more than one person exercising those functions, so as to replace one or more of those persons.
 
  PART VI
  MISCELLANEOUS
 
Challenge of directors' actions
     38. - (1) This paragraph applies in relation to acts or omissions of the directors of a company during a moratorium.
 
      (2) A creditor or member of the company may apply to the court by petition for an order under this paragraph on the ground-
 
 
    (a) that the company's affairs, business and property are being or have been managed by the directors in a manner which is unfairly prejudicial to the interests of its creditors or members generally, or of some part of its creditors or members (including at least the petitioner), or
 
    (b) that any actual or proposed act or omission of the directors is or would be so prejudicial.
      (3) An application for an order under this paragraph may be made during or after the moratorium.
 
      (4) On an application for an order under this paragraph the court may-
 
 
    (a) make such order as it thinks fit for giving relief in respect of the matters complained of,
 
    (b) adjourn the hearing conditionally or unconditionally, or
 
    (c) make an interim order or any other order that it thinks fit.
      (5) An order under this paragraph may in particular-
 
 
    (a) regulate the management by the directors of the company's affairs, business and property during the remainder of the moratorium,
 
    (b) require the directors to refrain from doing or continuing an act complained of by the petitioner, or to do an act which the petitioner has complained they have omitted to do,
 
    (c) require the summoning of a meeting of creditors or members for the purpose of considering such matters as the court may direct,
 
    (d) bring the moratorium to an end and make such consequential provision as the court thinks fit.
 
Offences
     39. - (1) This paragraph applies where a moratorium has been obtained for a company.
 
      (2) If, within the period of 12 months ending with the day on which the moratorium came into force, a person who was at the time an officer of the company-
 
 
    (a) did any of the things mentioned in paragraphs (a) to (f) of sub-paragraph (4), or
 
    (b) was privy to the doing by others of any of the things mentioned in paragraphs (c), (d) and (e) of that sub-paragraph,
  he is to be treated as having committed an offence at that time.
 
      (3) If, at any time during the moratorium, a person who is an officer of the company-
 
 
    (a) does any of the things mentioned in paragraphs (a) to (f) of sub-paragraph (4), or
 
    (b) is privy to the doing by others of any of the things mentioned in paragraphs (c), (d) and (e) of that sub-paragraph,
  he commits an offence.
 
      (4) Those things are-
 
 
    (a) concealing any part of the company's property to the value of £500 or more, or concealing any debt due to or from the company, or
 
    (b) fraudulently removing any part of the company's property to the value of £500 or more, or
 
    (c) concealing, destroying, mutilating or falsifying any book or paper affecting or relating to the company's property or affairs, or
 
    (d) making any false entry in any book or paper affecting or relating to the company's property or affairs, or
 
    (e) fraudulently parting with, altering or making any omission in any document affecting or relating to the company's property or affairs, or
 
    (f) pawning, pledging or disposing of any property of the company which has been obtained on credit and has not been paid for (unless the pawning, pledging or disposal was in the ordinary way of the company's business).
      (5) For the purposes of this paragraph, "officer" includes a shadow director.
 
      (6) It is a defence-
 
 
    (a) for a person charged under sub-paragraph (2) or (3) in respect of the things mentioned in paragraph (a) or (f) of sub-paragraph (4) to prove that he had no intent to defraud, and
 
    (b) for a person charged under sub-paragraph (2) or (3) in respect of the things mentioned in paragraph (c) or (d) of sub-paragraph (4) to prove that he had no intent to conceal the state of affairs of the company or to defeat the law.
      (7) Where a person pawns, pledges or disposes of any property of a company in circumstances which amount to an offence under sub-paragraph (2) or (3), every person who takes in pawn or pledge, or otherwise receives, the property knowing it to be pawned, pledged or disposed of in circumstances which-
 
 
    (a) would, if a moratorium were obtained for the company within the period of 12 months beginning with the day on which the pawning, pledging or disposal took place, amount to an offence under sub-paragraph (2), or
 
    (b) amount to an offence under sub-paragraph (3),
  commits an offence.
 
      (8) A person guilty of an offence under this paragraph is liable to imprisonment or a fine, or both.
 
      (9) The money sums specified in paragraphs (a) and (b) of sub-paragraph (4) are subject to increase or reduction by order under section 417A in Part XV.
 
     40. - (1) If, for the purpose of obtaining a moratorium, or an extension of a moratorium, for a company, a person who is an officer of the company-
 
 
    (a) makes any false representation, or
 
    (b) fraudulently does, or omits to do, anything,
  he commits an offence.
 
      (2) Sub-paragraph (1) applies even if no moratorium or extension is obtained.
 
      (3) For purposes of this paragraph, "officer" includes a shadow director.
 
      (4) A person guilty of an offence under this paragraph is liable to imprisonment or a fine, or both.
 
 
Void provisions in floating charge documents
     41. - (1) A provision in an instrument creating a floating charge is void if it provides for-
 
 
    (a) obtaining a moratorium, or
 
    (b) anything done with a view to obtaining a moratorium (including any preliminary decision or investigation),
  to be an event causing the floating charge to crystallise or a ground for the appointment of a receiver.
 
      (2) In sub-paragraph (1) "receiver" includes a manager and a person who is appointed both receiver and manager.
 
 
Subordinate legislation
     42. - (1) Regulations or an order made by the Secretary of State under this Schedule may make different provision for different cases.
 
      (2) Regulations so made may make such consequential, incidental, supplemental and transitional provision as may appear to the Secretary of State necessary or expedient.
 
      (3) Any power of the Secretary of State to make regulations under this Schedule may be exercised by amending or repealing any enactment contained in this Act (including one contained in this Schedule) or contained in the Company Directors Disqualification Act 1986.
 
      (4) Regulations or an order made by the Secretary of State under this Schedule shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament."
 
     5. In section 27(3)(a) (protection of interests of creditors and members when administration order in force), "section 4 in" is omitted.
 
     6. In section 122(1) (grounds on which company may be wound up by the court), after paragraph (f) there is inserted-
 
 
    "(fa) at the time at which a moratorium for the company under section 1A comes to an end, no voluntary arrangement approved under Part I has effect in relation to the company".
     7. In section 124 (application for winding up of company), after subsection (3) there is inserted-
 
 
    "(3A) A winding-up petition on the ground set out in section 122(1)(fa) may only be presented by one or more creditors".
 
     8. - (1) Section 233 (conditions which may be imposed on supply of gas, water, electricity, etc.) is amended as follows.
 
      (2) In subsection (1)-
 
 
    (a) after paragraph (b) there is inserted-
 
    "(ba) a moratorium under section 1A is in force, or",
 
    (b) in paragraph (c), for the words from "under Part I" to "section 3" there is substituted "approved under Part I", and
 
    (c) after "receiver" (in the second place) there is inserted "the nominee,".
      (3) In subsection (4)-
 
 
    (a) after paragraph (b) there is inserted-
 
    "(ba) the date on which the moratorium came into force", and
 
    (b) in paragraph (c), for the words following "arrangement" there is substituted "took effect".
     9. In section 387 (date which determines existence and amount of preferential debt), after subsection (2) there is inserted-
 
 
    "(2A) For the purposes of paragraph 29 of Schedule A1 (meetings to consider company voluntary arrangement where a moratorium under section 1A is in force), the relevant date in relation to a company is the date of filing."
 
     10. After section 417 there is inserted-
 
 
"Money sums (company moratorium).     417A. - (1) The Secretary of State may by order increase or reduce any of the money sums for the time being specified in the following provisions of Schedule A1 to this Act-
 
 
    paragraph 16(1) (maximum amount of credit which company may obtain without disclosure of moratorium);
 
    paragraph 39(4) (minimum value of company property concealed or fraudulently removed, affecting criminal liability of company's officer).
    (2) An order under this section may contain such transitional provisions as may appear to the Secretary of State necessary or expedient.
 
      (3) An order under this section shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament."
 
     11. In section 432(4) (offences by bodies corporate), at the end there is inserted "and those under paragraphs 15(2), 16(3)(a), 17(3), 18(3) and 21(1) of Schedule A1".
 
     12. In Schedule 10 (punishment of offences), before the entry relating to paragraph 4(3) of Schedule 7 there are inserted the following entries-
 
 
 
"Sch. A1, para. 9(2).
 
Directors failing to notify nominee of beginning of moratorium.
 
1. On indictment.
2. Summary.
 
2 years or a fine, or both.
6 months or the statutory maximum, or both.
 
Sch. A1, para. 10(3).
 
Nominee failing to advertise or notify beginning of moratorium.
 
Summary.
 
One-fifth of the statutory maximum.
 
Sch. A1, para. 11(2).
 
Nominee failing to advertise or notify end of moratorium.
 
Summary.
 
One-fifth of the statutory maximum.
 
Sch. A1, para. 15(2).
 
Company and officers failing to state in correspondence etc. that moratorium in force.
 
Summary.
 
One-fifth of the statutory maximum.
 
Sch. A1, para. 16(3)(a).
 
Company obtaining credit without disclosing existence of moratorium.
 
1. On indictment.
2. Summary.
 
A fine.
The statutory maximum.
 
Sch. A1, para. 16(3)(b).
 
Obtaining credit for company without disclosing existence of moratorium.
 
1. On indictment.
2. Summary.
 
2 years or a fine, or both.
6 months or the statutory maximum, or both.
 
Sch. A1, para. 17(3)(a).
 
Company disposing of property otherwise than in ordinary way of business.
 
1. On indictment.
2. Summary.
 
A fine.
The statutory maximum.
 
Sch. A1, para. 17(3)(b).
 
Authorising or permitting disposal of company property.
 
1. On indictment.
2. Summary.
 
2 years or a fine, or both.
6 months or the statutory maximum, or both.
 
Sch. A1, para. 18(3)(a).
 
Company making payments in respect of liabilities existing before beginning of moratorium.
 
1. On indictment.
2. Summary.
 
A fine.
The statutory maximum.
 
Sch. A1, para. 18(3)(b).
 
Authorising or permitting such a payment.
 
1. On indictment.
2. Summary.
 
2 years or a fine, or both.
6 months or the statutory maximum, or both.
 
Sch. A1, para. 19(9).
 
Directors failing to send to registrar office copy of court order permitting disposal of charged property.
 
Summary.
 
One-fifth of the statutory maximum.
 
Sch. A1, para. 21(1).
 
Company disposing of charged property.
 
1. On indictment.
2. Summary.
 
A fine.
The statutory maximum.
 
Sch. A1, para. 21(2).
 
Authorising or permitting such a disposal.
 
1. On indictment.
2. Summary.
 
2 years or a fine, or both.
6 months or the statutory maximum, or both.
 
Sch. A1, para. 23(6).
 
Nominee failing to give notice of withdrawal of consent to act.
 
Summary.
 
One-fifth of the statutory maximum.
 
Sch. A1, para. 32(3).
 
Nominee failing to give notice of extension of moratorium.
 
Summary.
 
One-fifth of the statutory maximum.
 
Sch. A1, para. 39(2).
 
Fraud or privity to fraud in anticipation of moratorium.
 
1. On indictment.
2. Summary.
 
7 years or a fine, or both.
6 months or the statutory maximum, or both.
 
Sch. A1, para. 39(3).
 
Fraud or privity to fraud during moratorium.
 
1. On indictment.
2. Summary.
 
7 years or a fine, or both.
6 months or the statutory maximum, or both.
 
Sch. A1, para. 39(7).
 
Knowingly taking in pawn or pledge, or otherwise receiving, company property.
 
1. On indictment.
2. Summary.
 
7 years or a fine, or both.
6 months or the statutory maximum, or both.
 
Sch. A1, para. 40(1).
 
False representation or fraud for purpose of obtaining or extending moratorium.
 
1. On indictment.
2. Summary.
 
7 years or a fine, or both.
6 months or the statutory maximum, or both."
 
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