Corporate Insolvency: The Enterprise Act 2002

The corporate insolvency provisions will be brought into force in September 2003. The aim of this legislation is to promote the rescue culture and encourage entrepreneurship.

The Act will include the following effects:

• The holder of a qualifying floating charge will not be able to appoint an administrative receiver.
• The holder of a qualifying floating charge will not be able to prevent the making of an administration order.
• There will be a new administration procedure which includes an out of court procedure.
• The primary objective of the administration order will be to rescue the company.
• The administrator must send a statement of proposals to achieve this purpose to all known creditors within 8 weeks of appointment.
• The administrator will owe a duty of care to all creditors.
• The administration will automatically terminate after a period of 12 months unless extended by the court or consent.
• Certain preferential Crown debts will be abolished. A new ring-fencing mechanism will make a percentage of floating charge realisations available to the unsecured creditors.

Jan Arkwright, Associate
17 July 2003