Insolvency Bill [H.L.] - continued        House of Lords
SCHEDULE A1, MORATORIUM WHERE DIRECTORS PROPOSE VOLUNTARY ARRANGEMENT - continued
PART III, EFFECTS OF MORATORIUM - continued

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Obtaining credit during moratorium
     17. - (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
     18. - (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 34(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.
     19. - (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 34(1) or, where there is no such committee, by the nominee.
      (2) Sub-paragraph (1) does not apply to a payment required by paragraph 20(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.
     20. - (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.
 
     21. - (1) Where property is disposed of under paragraph 20 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 20 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.
 
     22. - (1) If the company-
 
 
    (a) disposes of any property or goods of a description mentioned in paragraph 20(1) other than in accordance with that paragraph, or
 
    (b) fails to comply with any requirement imposed by paragraph 20 or 21,
       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
     23. - (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 30(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
     24. - (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 30(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 23(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.
     25. - (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.
 
     26. - (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.
 
 
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