Changes to insolvency laws assist business

Changes to the Northern Ireland Insolvency law will assist would-be entrepreneurs and businesses in financial difficulty.

The Insolvency (Northern Ireland) Order 2005, which became law on Monday March 27, makes major changes to the law in Northern Ireland.

The Order will bring about significant changes to the current legislation, which will bring benefits to creditors, a significant majority of bankrupts and companies in financial difficulties. With limited exceptions lenders will no longer be allowed to put companies into Administrative Receivership. The Order offers instead a collective procedure which takes into account the interests of all creditors, not just those holding security. Modifications made by the new Order are designed to facilitate the rescue of viable companies, or, if that is not practicable, to achieve a better outcome for company creditors as a whole than if the company were to be wound up entirely.

The new Order also abolishes Crown preference, meaning that the Government will no longer be able to claim unpaid taxes before other creditors. This should bring real benefits to unsecured creditors, including many small firms.

Those declared bankrupt will also see the benefits of the new Insolvency Order as the bankruptcy period has been reduced from three years to a maximum of 12 months. This is aimed at encouraging those who have learned from business failure to make another attempt. A new Bankruptcy Restrictions Order regime, under which discharged bankrupts can be subjected to continuing restrictions for up to 15 years, will be enforced to protect the public from those who are culpable, incompetent, or financially reckless.

Jack Reid, Department of Enterprise Trade and Investment’s Insolvency Service said: “This new Order will bring about a modernisation of the current procedures which will benefit creditors and businesses. It will give struggling companies a lifeline and ensure a better outcome for creditors.”

(SP/GB)