META: UK insolvency legislation has evolved greatly since enactment of Insolvency Act 1896 provisions that authorized IVA
Individual Voluntary Agreements, or IVAs, denote a process of obtaining debt relief via legally binding contract formation between creditors and debtors as an alternative to formal bankruptcy. People who enter an IVA are unable to maintain current financial obligations but wish to avoid mandatory asset liquidation. IVA also benefits creditors by recovering greater portion of unpaid debt than bankruptcy would probably permit. Insolvency Practitioners are licensed professionals with responsibility to review debt repayment proposal terms and oversee actual remittance to facilitate compliance for a successful case outcome. The Office of Fair Trading has regulatory oversight of IP licensure and professional standards designed for public protection.
Insolvency Act 1986
Labour officials requested an investigation of UK insolvency legislation and practices by Kenneth Cork in 1977. Five years later, the Cork Report was released that featured numerous recommendations for modernizing and correcting many deficiencies within insolvency sectors. That Report and a subsequent related whitepaper ultimately formed the basis of Insolvency Act of 1986 drafting enacted into law by UK Parliament members. The legislation addresses individual and commercial insolvency via bankruptcy but Section 8 includes IVA provisions and definitions.
The law also sets forth precise IP obligations and qualifications pertaining to licensure, education, and passage of a comprehensive exam administered by the Joint Insolvency Examination Board (JIEB), as well as prior experience. In addition, IP licensees must adhere to ethical and professional standards throughout all cases entrusted to their supervision. Insolvency cases may be simple matters or involve very complicated legal and financial issues. Primary proper IP objectives are maximizing creditor recovery while ensuring best interests of debtors and other involved parties.
Enterprise Act of 2002
Enterprise Act of 2002 legislation also features various aspects that impact IVA insolvency cases. For example, Section 263(f)mandated revised procedures for revocation. Specifically, courts are allowed to revoke IVAs only in two circumstances: 1) when IVA is deemed to unfairly prejudice debtor or creditor interests, and 2) material irregular conduct occurring during IVA duration. Petitions to revoke may be filed only by debtors, official receivers, bankruptcy trustees, or persons with legal right for agreement participation.
Section 263(b) stipulates requisite steps for IVA proposal feasibility analyses. First, debtors must prepare a written debt repayment plan and financial statement that lists assets and liabilities. Receivers than conduct creditor voting to establish majority plan approval.
Per Section 263(d), an IVA becomes legally binding on all concerned parties immediately upon final court approval. Such contractual obligations extend to debtor and every creditor with entitlement to vote and participate in deliberations for plan approval. After approving an IVA, the court also annuls debtor bankruptcy, unless an objection is raised to proposed debt repayment plan that requires adjudication.
2013 Enterprise and Regulatory Reform Act
This is a new piece of legislation enacted last April that amends applicable rules for Individual Voluntary Agreements. A major example is expansion of legal definition of “essential services” for insolvency cases. Commercial entities attempting to attain economic solvency enjoy legal protection from excessive cost increases and service termination by utility providers, if such events would decrease likelihood of successful financial resurgence. The Act includes IT services, due to their extreme significance for modern business operations.
Another especially major provision mandates abdication of Office of Fair Trading, Insolvency Act 1986 early discharge provisions, and electronic filing of bankruptcy applications. OFT and Competition Commission merger is required for enhanced regulatory efficiency via establishment of a new entity in 2014 known as “Competition and Markets Authority.” Rather than early discharge for bankrupt debtors who fulfill all proscribed requirements, all bankrupts with no outstanding legal disputes will receive automatic discharge after 12 months. E-application of bankruptcy petitions and creditor claims are anticipated to induce a higher incidence of bankrupt declarations that in turn create enhanced urgency for creditor monetary recovery of outstanding debts more expeditiously.
Of course, ultimate outcomes and actual impacts of these respective legislative schemes in both formal bankruptcy declarations and Individual Voluntary Arrangements remain to be seen. Nevertheless, full compliance with all regulatory and statutory provisions is necessary to obtain creditor and court approval of revised debt repayment plan proposals. Besides this, each case of insolvency is different and indicates highly individualized optimal solutions. Thus, qualified legal counsel is required for accurate advise and maximum odds of successful financial solvency restoration