Lloyd's Maritime and Commercial Law Quarterly
Reforming the governance of corporate rescue: The Enterprise Act 2002
John Armour *
Rizwaan Jameel Mokal †
The Enterprise Act 2002 has reshaped English corporate insolvency law. The Act was intended ‘‘to facilitate company rescue and to produce better returns for creditors as a whole’’. Administrative receivership, which placed control of insolvency proceedings in the hands of banks, is for most purposes being abolished. It is being replaced by a ‘‘streamlined’’ administration procedure. Whilst it will still be possible for banks to control the appointment process, the administrator, once in office, owes duties to all creditors and must act in accordance with a statutory hierarchy of objectives. This article seeks to describe, and to evaluate, this new world of corporate rescue.
A. INTRODUCTION
English corporate insolvency law is being reshaped. The Enterprise Act 2002 (‘‘the Act’’), the relevant provisions of which came into force on 15 September 2003, brought with it the most significant changes to insolvency law for over 15 years. The Act is designed ‘‘to facilitate company rescue and to produce better returns for creditors as a whole’’.1
It seeks to achieve this through three principal changes. First, administrative receivership is for most purposes being abolished. This procedure was widely regarded as giving an unhealthy amount of power to creditors holding floating charges, who because of their
* Faculty of Law and Centre for Business Research, University of Cambridge.
† Faculty of Laws, UCL and Centre for Business Research, University of Cambridge.
We are grateful to John Argenti, Rodney Austin, Richard Calnan, Maria Carapeto, David Citron, Glen Davis, Robin Dicker QC, Look Chan Ho, Jeffrey Jowell QC, Alan Katz, Michael Mumford, Richard Nolan, Dan Prentice, Richard Snowden QC, Adrian Walters and two anonymous referees for valuable discussions and comments on earlier drafts. We are also grateful for comments received following presentations at the IALS and a roundtable conference on the Enterprise Act in Cambridge. The views expressed and mistakes made are of course ours alone.
The following abbreviations are used in the footnotes:
Cork Report
: Sir K. Cork (chair), Insolvency Law and Practice: Report of the Review Committee (Cmnd 8558, 1982).
Explanatory Notes
: Explanatory Notes to the Enterprise Act 2002
.
Franks & Sussman, ‘‘Cycle’’: J. Franks and O. Sussman, ‘‘The Cycle of Corporate Distress, Rescue and Dissolution: A Study of Small and Medium Size UK Companies’’: IFA Working Paper (2000).
I.A. 1986: Insolvency Act 1986 as amended.
Insolvency—A Second Chance
: Productivity and Enterprise: Insolvency—A Second Chance
(Cmnd 5234, 2001).
Old I.A. 1986: Insolvency Act 1986 prior to 15 September 2003.
QFCH: ‘‘qualifying’’ floating charge holder.
1. (10 April 2002), 383 HC Deb, col 53 (Ms Patricia Hewitt MP, Secretary of State for Trade and Industry).
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