UK - Northern Ireland

On Friday 5 September 2003 the Company Directors' Disqualification (Northern Ireland) Order 2002 came into operation.

The Company Directors' Disqualification Order amends and consolidates the existing law relating to the disqualification of company directors. It introduces new provisions to allow disqualification by administrative consent as an alternative to High Court proceedings where there is evidence of unfitness on the part of a director and where that director is not disputing his unfitness.

In such cases it will allow the Department of Enterprise, Trade and Investment to accept an undertaking from the director not to act as a director for a specific period. An undertaking will have the same legal effects as a disqualification order.

The Insolvency (Northern Ireland) Order 2002 came into operation on 2 February 2004.

The Insolvency Order contains a range of measures to modernise and update personal and corporate insolvency law. A spokesperson for the Insolvency Service said: "The Order builds upon the current voluntary arrangement procedure for companies in financial difficulties.

"It makes available to the directors of small companies who are attempting to set up a voluntary arrangement with the company's creditors the option of a short moratorium during which the company will be protected from the threat of legal proceedings or enforcement action by its creditors. This will provide a breathing space for the company to convene a meeting of its creditors who can then vote on whether to accept whatever proposal the company can make for paying them, for example by instalments over a period of time."

Key Legislation

• Company Directors' Disqualification (Northern Ireland) Order 2002
• Insolvency (Northern Ireland) Order 2002

Insolvency Procedures

Personal Insolvency Procedures

The following personal insolvency procedures are available in Northern Ireland:

• Bankruptcy
• Individual Voluntary Arrangement - this is a formal arrangement and involves an application to the Court with the assistance of an authorised insolvency practitioner. He or she will act as supervisor of any subsequently agreed arrangement and pay creditors in line with the accepted proposals.
• Administration Order - if one or more creditors has obtained a judgment, the Enforcement of Judgments Office may make an administration order against a debtor if the total debts are not more than £2,000. Under this order, the debtor must make regular payments to the Enforcement of Judgments Office to pay towards the creditors.

Corporate Insolvency Procedures

The following corporate insolvency procedures are available in Northern Ireland:

• Liquidation
• Company Voluntary Arrangement

  Through a company voluntary arrangement the directors can put a proposal to the company and its creditors for payment of part or all of the company's debts, usually over a period of time. The directors must engage an insolvency practitioner to act as nominee. The nominee carries out the initial procedure that must be gone through to set up a voluntary arrangement. Meetings of the company and its creditors must then be held to vote on the proposal. A majority in excess of three quarters in terms of value of the creditors present in person or by proxy and voting must vote in favour of the resolution for it to be passed at the creditors' meeting. Once a proposal has been approved, its implementation is overseen by an insolvency practitioner acting as supervisor.

• Administration Order

  The company or its directors can apply to the High Court for an administration order under which an administrator is appointed by the Court to manage the affairs, business and property of the company. Before the Court will make such an order, it must be satisfied that the making of the order is likely to achieve one of four purposes;

  • the survival of the company and the whole or part of its undertaking as a going concern
  • the approval of a voluntary arrangement
  • the sanctioning of a compromise or arrangement under Article 418 of the Companies (NI) Order 1986
  • a more advantageous realisation of the company's assets than would occur in a winding up.

  On appointment the administrator takes control of the property and running of the company. He has the power to remove and appoint directors.

  The administrator must, within three months of his appointment or such longer period as the Court allows, lay a statement of his proposals for achieving the purposes for which he was appointed before a meeting of the company's creditors for their approval. Approval is by a simple majority of those present and voting.

Roles

Role played by Government

The Official Receiver (for Northern Ireland) is a civil servant and an officer of the High Court. As well as administering cases, the OR has a duty to investigate the affairs of individuals in bankruptcy and companies in compulsory liquidation. He or she reports evidence of criminal offences to the Insolvency Service's Prosecution Unit and reports unfit conduct by company directors to the branch's Directors Disqualification Unit, which decides whether to commence Court proceedings to disqualify a director.

The purpose and role of the Insolvency Service (the Service) is to promote and maintain the integrity and working of the market place by:

• administering and investigating the affairs of bankrupts and companies in compulsory liquidation; and
• handling the disqualification of directors in all corporate insolvencies under the Insolvency (Northern Ireland) Order 2002 and Company Directors' Disqualification (Northern Ireland) Order 2002 which deals with disqualification of directors for unfitness.

Role played by private sector practitioners

They are usually accountants or solicitors. They are required by law (the Insolvency (NI) Order 1989) to be authorised to act as Insolvency Practitioners. The authorisation is carried out by the Department of Enterprise, Trade and Investment or by one of the Recognised Professional Bodies (RPBs). RPBs are approved by the Department of Enterprise, Trade and Investment to authorise their members. About 95% of IPs are authorised by RPBs. IPs acting as liquidators in creditors' voluntary liquidations, administrative receivers and administrators have a duty to report to the Department of Enterprise, Trade and Investment any evidence of unfit conduct by company directors.

Role played by the Court

The Court:

• determine petitions by debtors and creditors for bankruptcy/compulsory winding up
• determine issues in insolvencies brought to them by The Insolvency Service, insolvency practitioners, insolvents, creditors and others.

At a Glance

Does the insolvency system in the UK - Northern Ireland allow for:

1.	Different procedures for the insolvency of individuals and the insolvency of companies?
2.	Creditors to accept an arrangement outside of formal bankruptcy/liquidation proceedings?
3.	Priority payment for employee creditors?
4.	Priority payment for taxation debts?
5.	Automatic disqualification of directors of failed companies from managing other companies?
6.	Recognition of insolvency proceedings being conducted in another jurisdiction?
7.	A government agency to undertake insolvency administration work?
8.	Some form of licensing of private sector practitioners?
9.	A review of the remuneration claimed by an insolvency practitioner by either a court or other government regulator?
10.	A mandatory scale of fees applicable to insolvency practitioner remuneration?
11.	Surveillance of the work of private sector practitioners by a government regulator?
12.	Collation of insolvency statistics by a government regulator?