The Insolvency Act 1986 (c. 45) is an act of the

Parliament of the United Kingdom The Parliament of the United Kingdom of Great Britain and Northern Ireland is the supreme legislative body of the United Kingdom, and may also legislate for the Crown Dependencies and the British Overseas Territories. It meets at the Palace ...

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 An individual voluntary arrangement (IVA) is a formal alternative in England and Wales for individuals wishing to avoid bankruptcy in England and Wales, bankruptcy. In Scotland, the equivalent statutory debt solution is known as a protected tr ...

(IVA) and

Company Voluntary Arrangement Under UK insolvency law an insolvent company can enter into a company voluntary arrangement (CVA). The CVA is a form of composition, similar to the personal IVA (individual voluntary arrangement), where an insolvency procedure allows a compa ...

(CVA) procedures. Elements of the Act were updated by the

Enterprise Act 2002 The Enterprise Act 2002 (c. 40) is an act of the Parliament of the United Kingdom which made major changes to UK competition law with respect to mergers and also changed the law governing insolvency bankruptcy. It made cartels illegal with a ma ...

, which came into effect on 1 April 2004 and introduced amongst other things the popular "out-of-court" administration route,Lyndon Norley, Kirkland & Ellis International LLP and Joseph Swanson and Peter Marshall,

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(2008). A Practitioner's Guide to Corporate Restructuring. City & Financial Publishing, 1st edition 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 creditor An unsecured creditor is a creditor other than a preferential creditor that does not have the benefit of any security interests in the assets of the debtor. In the event of the bankruptcy of the debtor, the unsecured creditors usually obtain a '' ...

s ahead of

secured creditor A secured creditor is a creditor with the benefit of a security interest over some or all of the assets of the debtor. In the event of the bankruptcy of the debtor, the secured creditor can enforce security against the assets of the debtor and avo ...

s. 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. Those considering the main Act should also refer to the

Insolvency Rules 1986 United Kingdom insolvency law regulates companies in the United Kingdom which are unable to repay their debts. While UK bankruptcy law concerns the rules for natural persons, the term ''insolvency'' is generally used for companies formed unde ...

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 th
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 The COVID-19 pandemic (also known as the coronavirus pandemic and COVID pandemic), caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), began with an disease outbreak, outbreak of COVID-19 in Wuhan, China, in December ...

The Insolvency Act 1986 essentially governs issues relating to

personal bankruptcy Personal bankruptcy law allows, in certain jurisdictions, an individual to be declared bankrupt. Virtually every country with a modern legal system features some form of debt relief for individuals. Personal bankruptcy is distinguished from corpora ...

and

Individual Voluntary Arrangements An individual voluntary arrangement (IVA) is a formal alternative in England and Wales for individuals wishing to avoid bankruptcy. In Scotland, the equivalent statutory debt solution is known as a protected trust deed. The IVA was establish ...

and all administrative orders relating to company

insolvency In accounting, insolvency is the state of being unable to pay the debts, by a person or company ( debtor), at maturity; those in a state of insolvency are said to be ''insolvent''. There are two forms: cash-flow insolvency and balance-sheet i ...

Companies winding up

*Part I -

s *Part II -

Administration Administration may refer to: Management of organizations * Management, the act of directing people towards accomplishing a goal: the process of dealing with or controlling things or people. ** Administrative assistant, traditionally known as a se ...

Orders *Part III -

Receivership In law, receivership is a situation in which an institution or enterprise is held by a receiver – a person "placed in the custodial responsibility for the property of others, including tangible and intangible assets and rights" – especia ...

(ss 22-72H) ** Chapter I - Receivers and Managers (England and Wales) ** Chapter II - Receivers (Scotland) ** Chapter III - Receivers Powers in Great Britain as a whole *Part IV -

Winding Up Liquidation is the process in accounting by which a company is brought to an end. The assets and property of the business are redistributed. When a firm has been liquidated, it is sometimes referred to as wound-up or dissolved, although di ...

of Companies Registered Under the Companies Acts (ss 73-219) ** Chapter I - Preliminary ** Chapter II - Voluntary Winding Up (Introductory and General) ** Chapter III - Members' Voluntary Winding Up (ss 91-96) ** Chapter IV - Creditors' Voluntary Winding Up (ss 97-106) ** Chapter V - Provisions Applying to both kinds of Winding up ** Chapter VI - Winding Up by the Court (ss 117-162) ** Chapter VII - Liquidators ** Chapter VIII - Provisions of general application in winding up ** Chapter IX - Dissolution of companies after winding up ** Chapter X - Malpractice before and during Liquidation; Penalisation of companies and company officers; Investigations and prosecutions (ss 206-219). Section 213 lies within this part, and provides for individuals who are aware that business has been carried on with the intent to defraud the company's creditors to be called upon to contribute to the company’s assets. *Part V - Winding Up Unregistered Companies (ss 220-229) *Part VI - Miscellaneous Provisions applying to Companies which are Insolvent or in Liquidation *Part VII - Interpretation for first group of parts

Insolvency of individuals – bankruptcy

*Part VIII - Individual Voluntary Arrangements *Part IX - Bankruptcy (ss 264-371) * Chapter I - Bankruptcy Petitions - Bankruptcy Orders * Chapter II - Protection of Bankrupt's Estate and Investigation of his Affairs * Chapter III - Trustees in Bankruptcy * Chapter IV - Administration by Trustee * Chapter V - Effect of Bankruptcy on certain rights, transactions etc. * Chapter VI - Bankruptcy Offences * Chapter VII - Powers of Court in Bankruptcy *Part X - Individual Insolvency: General Provisions *Part XI - Interpretation for second group of parts

Miscellaneous matters

*Part XII - Preferential debts in company and individual insolvency *Part XIII - Insolvency Practitioners and their qualifications (ss 338-398) *Part XIV - Public Administration (ss 399-410) *Part XV - Subordinate Legislation *Part XVI - Provisions against debt avoidance (England and Wales Only) *Part XVII - Miscellaneous and General *Part XVIII - Interpretation *Part XIX - Final Provisions

Schedules

*Schedule B1, on the new administration procedure after the

Notes

External links

Original text of the statute
as published by the

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Text of Act from insolvencyhelpline.co.uk
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Insolvency Service websiteInsolvency Practitioners Association website
{{UK legislation United Kingdom Acts of Parliament 1986 Insolvency law of the United Kingdom United Kingdom company law Bankruptcy in the United Kingdom