Insolvency Act 1986

And the important thing to note is that if you decide to make an application to make yourself bankrupt, there is the possibility that the application will be refused because the adjudicator for example, concludes that you were actually able to pay your debts.

And in order to apply to become bankrupt, you need to establish one of the three jurisdictional grounds in Section 263i of the Insolvency Act.

So, first is that your centre of main interest, or COMI, is in England and Wales, or your COMI is in a EU member state other than Denmark, and you have an establishment in England and Wales, or...

You're domiciled in England and Wales or been ordinarily residing or carrying on business in England and Wales for a period of three years, ending on the day which you've made the application to the adjudicator.

Well, it's covered in an episode that Paul Fuller and I have done, which is titled Statutory Demands and Winding Up Petitions.

Okay, so working on the basis we have that, what's the next

step? So, assuming that you've met the bankruptcy threshold of £5,000, Section 265 of the Insolvency Act sets out the jurisdictional grounds, which is identical to the jurisdictional grounds on making an application to a judge yourself as bankrupt, i.e., your Comey is in England and Wales, or it's in the European Union, other than Denmark, but you have an establishment in England and Wales, or you've been domiciled, the debt has been domiciled in England, or ordinary resigning, or carrying on a business for a period of three years, and beyond the date the petition was presented.

In terms of meeting the jurisdictional requirements at Section 265, the creditor needs to show that there's a good arguable case that the bankruptcy court has jurisdiction to hear the petition.

We'll look at how the statutory regime works, why winding up petitions can be so effective, the circumstances in which the courts will intervene to protect against abuse, and some practical points for creditors and debtors.

Everything starts with the Insolvency Act 1986, Section 122 subsection 1F gives the court jurisdiction to wind up a company where the company is unable to pay its debts.

The question then becomes, how does a creditor prove that inability to pay?

And the answer to that question is found in section 123 of the Act.

Depending on the circumstances, the court may dismiss the petition, adjourn the hearing, permit further evidence to be filed, allow time for payment, if satisfied as to insolvency in compliance with the procedural requirements, make a winding-up order.

And so what are the key takeaways? For creditors, statutory demands and one-year petitions remain highly effective tools.

Used properly, they provide a mechanism for establishing insolvency and commencing a collective insolvency process under the Insolvency Act 1986.

For debtor companies, the important message is to act quickly.

And the judgment hinges on whether on notice that liquidator should have rightly converted straight away into CVL, as opposed to suggesting that as a disputed debt, it was appropriate for the case to stay in MVL.

And the judgment focuses on what goes on with Sections 89 and 95 of the Insolvency Act 1986.

So Section 89, as everyone will be aware of, directors must make their statutory declaration of solvency, confirming the company can pay all its debts in full with interest within 12 months of the MVL.

And then Section 95, which if debts cannot be paid during this period, the MVL should be converted to a CVL.

And to see, because they're basically bringing a challenge in England saying that this is a transaction at an undervalue and it is intended to move assets away from creditors.

And so it should be prohibited under the Insolvency Act.

But before you can bring a solid claim, you need to have more facts.

And so the suit in New York is intended to get those facts to come out.