W9

Question 1

What is the purpose of obtaining court permission in relation to paying a dividend to unsecured creditors during administration?

Answer 1

Generally, administrators do not have the power to pay a dividend to unsecured creditors without obtaining court permission.

Question 2

What is the purpose of passing a special resolution and an ordinary resolution in the liquidation process?

Answer 2

A special resolution is passed to put the company into liquidation, while an ordinary resolution is passed to nominate a liquidator

Question 3

What are preferential debts in insolvency proceedings?

Answer 3

Preferential debts are specific types of debts that have priority over other unsecured debts in insolvency proceedings. They include employee claims for unpaid remuneration and certain contributions to an occupational pension scheme.

Question 4

What is the definition of insolvency for companies according to Section 122(1)(f) of the Insolvency Act 1986?

Answer 4

Insolvency for companies is defined as an inability to pay its debts.

Question 5

What is the time limit for completing administrations?

Answer 5

There is a 12-month fixed time limit for the completion of administrations, although it is possible to obtain extensions.

Question 6

What is the purpose of a Company Voluntary Arrangement (CVA)?

Answer 6

The purpose of a CVA is to reach a compromise with creditors, allowing the company to continue trading and avoid liquidation.

Question 7

What are the two most important tests for insolvency?

Answer 7

The two most important tests for insolvency are the cash flow test and the balance sheet test.

Question 8

What is the prescribed part fund in liquidation?

Answer 8

The prescribed part fund is a portion of the company’s net property that is set aside for distribution to unsecured creditors in a liquidation. It aims to increase the chance that unsecured creditors will receive some payment.

Question 9

When does dissolution occur after the liquidation process?

Answer 9

In the case of compulsory liquidation, dissolution occurs three months after notice by the liquidator to the Registrar of Companies that the winding up of the company has been completed. In the case of voluntary liquidation, dissolution occurs three months from the filing by the liquidator of the final accounts and return.

Question 10

What is the role of an administrator in producing a report during administration?

Answer 10

Once appointed, the administrator has up to eight weeks to produce a report setting out proposals for the conduct of the administration, which may include proposals to restructure liabilities through a scheme of arrangement, a restructuring plan, or a CVA. This report is sent to all creditors for their approval.

Question 11

How are CVAs approved?

Answer 11

CVAs are approved if at least 75% in value of unsecured creditors vote in favor, along with over 50% of shareholders. The approval of the CVA proposal by creditors is crucial.

Question 12

What options do directors have when their company is in financial difficulty?

Answer 12

Directors have a range of options including doing nothing, restructuring the company’s liabilities with creditors, appointing an administrator or receiver, or placing the company into liquidation.

Question 13

What is the order of priority for payment in a liquidation?

Answer 13

In a liquidation, the order of priority for payment is as follows: fixed charge holders, expenses of the liquidator, preferential debts, floating charge holders, unsecured creditors, and shareholders.

Question 14

What happens if the administrator’s proposals are rejected by the creditors?

Answer 14

If the administrator’s proposals are rejected, the company will usually be placed into liquidation.

Question 15

How does the court-based process for placing a company into liquidation work?

Answer 15

To begin the process of compulsory liquidation, an applicant presents a winding up petition to the court, requesting the court to make a winding up order against the company on statutory grounds. When the court grants the petition, the order operates in favor of all the creditors and contributories of the company. The Official Receiver becomes the liquidator initially and notifies Companies House and all known creditors of the liquidation.

Question 16

What is the purpose of a pre-insolvency moratorium?

Answer 16

A pre-insolvency moratorium provides struggling companies with a period during which creditors are unable to take action, allowing the company time to negotiate agreements with its creditors or propose formal arrangements.

Question 17

What happens if the members vote against the CVA proposal but the creditors vote in favor?

Answer 17

If the creditors vote in favor of the CVA proposal but the members vote against it, the creditors’ vote will always prevail.

Question 18

What happens if the administrator’s proposals are accepted by the creditors?

Answer 18

If the administrator’s proposals are accepted, the administrator will proceed with their proposals. If their proposals are achieved, the company will exit administration.

Question 19

What is the purpose of bankruptcy and individual voluntary arrangements (IVAs) in personal insolvency?

Answer 19

Bankruptcy and IVAs are formal insolvency procedures for insolvent individuals. Bankruptcy involves the collection, sale, and distribution of an individual’s assets to creditors, while an IVA allows the debtor to make a proposal for repayment and reach a binding agreement with their creditors.

Question 20

What is the role of the Nominee in a CVA?

Answer 20

The Nominee reports to the court that the CVA has been approved and usually becomes the Supervisor, responsible for implementing the CVA proposal.

Question 21

Who can apply for a winding up order?

Answer 21

The following persons can apply to the court for the issue of a winding up petition: a creditor, the company (acting by the shareholders), the directors, an administrator, an administrative receiver, the supervisor of a CVA, and the Secretary of State for Business, Energy & Industrial Strategy.

Question 22

What is the main advantage of a Company Voluntary Arrangement (CVA)?

Answer 22

The main advantage of a CVA is that if the requisite majorities of creditors and/or shareholders vote in favor of it, it becomes legally binding even if some creditors voted against it or did not receive notice of the procedure.

Question 23

How does a CVA affect unsecured creditors?

Answer 23

A CVA is binding on all unsecured creditors, including those who did not vote or voted against it. However, secured or preferential creditors are not bound unless they unanimously consent to the CVA.

Question 24

What is the role of the Supervisor in an Individual Voluntary Arrangement (IVA)?

Answer 24

The Supervisor in an IVA is responsible for supervising the debtor’s implementation and compliance with the terms of the arrangement. They report to the court periodically and have the power to petition for the debtor’s bankruptcy if they fail to comply.

Question 25

What are the key grounds on which the court can order a company to be wound up?

Answer 25

The key grounds for a winding up order include the company’s inability to pay its debts and it being just and equitable for the company to be wound up.

Question 26

What is the benefit of an administrative moratorium during administration?

Answer 26

One key benefit of administration is that during administration, the company has the benefit of a full moratorium, which acts as a breathing space allowing them to sort things out and try to save the company. This means that no order or resolution to wind up the company can be made or passed, no administrative receiver can be appointed, no steps can be taken to enforce any security over the company’s property, and legal proceedings cannot be commenced or continued against the company or its property.

Question 27

What types of debts must still be paid during a pre-insolvency moratorium?

Answer 27

During a pre-insolvency moratorium, debts such as the Monitor’s remuneration or expenses, goods and services supplied during the moratorium, rent, wages or salary, redundancy payments, and loans under financial service contracts must still be paid.

Question 28

What can creditors challenge in a CVA?

Answer 28

Creditors can challenge a CVA within 28 days of its approval by creditors being reported to the court. They can challenge it on the grounds of ‘unfair prejudice’ or material irregularity relating to the procedure followed in seeking approval.

Question 29

What are some advantages and disadvantages of an Individual Voluntary Arrangement (IVA) compared to bankruptcy?

Answer 29

Some advantages of an IVA include avoiding the stigma and restrictions associated with bankruptcy, binding all unsecured creditors, and the availability of a moratorium. Disadvantages include longer duration, inability to bind secured or preferential creditors without consent, and potential uncertainty in creditor approval.

Question 30

How is a company’s inability to pay its debts determined in the liquidation process?

Answer 30

A company’s inability to pay its debts can be evidenced by failure to comply with a creditor’s statutory demand, failure to pay a debt after a statutory demand has been issued, or proof to the satisfaction of the court that the company is unable to pay its debts as they fall due.

Question 31

What is the purpose of a Standstill Agreement in informal arrangements?

Answer 31

A Standstill Agreement is used to temporarily prevent creditors from enforcing their rights or remedies, giving the company time to negotiate an arrangement to resolve its financial issues.

Question 32

What powers do administrators have under IA 1986?

Answer 32

Administrators have wide powers under IA 1986 to ‘do all such things as may be necessary for the management of the affairs, business, and property of the company’. These include the powers to remove and appoint directors, dispose of property subject to a floating charge, dispose of property subject to a fixed charge (with the court’s consent), and bring proceedings against directors for fraudulent and wrongful trading.

Question 33

What grounds can lead to a bankruptcy petition being brought against an individual?

Answer 33

ANSWER

A bankruptcy petition can be brought by a creditor or the debtor themselves. Grounds for the petition include the debtor’s inability or lack of reasonable prospect to pay their debts.

Question 34

What is the purpose of a Restructuring Plan?

Answer 34

The purpose of a Restructuring Plan is to compromise a company’s creditors and shareholders and restructure its liabilities so that the company can return to solvency.

Question 35

What happens when a winding up order is made in the compulsory liquidation process?

Answer 35

Once a court finds that the grounds for a winding up order are satisfied and it makes a compulsory winding up order, certain consequences follow. These include an automatic stay on commencing or continuing with proceedings against the company, automatic dismissal of all employees, and the directors losing their powers and being automatically dismissed from office.

Question 36

What is the advantage of a Restructuring Plan over a CVA?

Answer 36

A Restructuring Plan can compromise the rights and claims of secured creditors and shareholders, while a CVA cannot. Additionally, a Restructuring Plan can be sanctioned by the court to bind all creditors even without the requisite majority approval in every voting class.

Question 37

What is a pre-packaged administration?

Answer 37

A pre-packaged administration is where the business and assets of an insolvent company are prepared for sale to a selected buyer prior to the company’s entry into administration. The terms of the sale agreement are negotiated and agreed before the administrators’ appointment, and the administrators complete the sale with the buyer immediately following their appointment.

Question 38

What is the effect of approval of an Individual Voluntary Arrangement (IVA) on the debtor and creditors?

Answer 38

If approved, an IVA binds the debtor and all unsecured creditors to its terms. However, it cannot bind secured or preferential creditors without their consent.

Question 39

Why are pre-packaged sales in administration controversial?

Answer 39

Pre-packaged sales are controversial, particularly when the sale is to existing shareholders or directors. There is often concern that the sale does not take place at the proper price and that creditors are given insufficient information to determine whether the sale was in their best interests.

Question 40

What are the three situations in which a voluntary winding up can occur?

Answer 40

A voluntary winding up can occur when the company’s purpose according to the articles has expired and is resolved by the shareholders (rare), when the company resolves by special resolution to wind up the company (solvent), or when the company resolves that it is advisable to wind up the company due to its inability to carry on its business (insolvent).

Question 41

How are administrators appointed in the administration process?

Answer 41

Administrators may be appointed by the court or out of court. The court appointment occurs when someone has tried to wind up the company, while the out-of-court appointment is more common and can be done by the directors or a qualifying floating charge holder (QFC).

Question 42

What is the role of the Trustee in bankruptcy proceedings?

Answer 42

The Trustee in bankruptcy is appointed to gather and distribute the bankrupt’s assets in accordance with the statutory order of priority. They have a wide range of powers and can bring claims for certain types of preferences and other actions.

Question 43

What is the role of the liquidator in the winding up process?

Answer 43

The liquidator secures and realizes the assets of the company, takes custody or control of all the company’s property, manages the company’s affairs, pays debts, compromises claims, and carries out other necessary tasks to wind up the company’s affairs and distribute its assets.

Question 44

What is the purpose of the prescribed part fund in liquidation?

Answer 44

The prescribed part fund aims to increase the chance that unsecured creditors will receive some payment in a liquidation. It reserves a portion of the company’s net property for distribution to unsecured creditors.

Question 45

What are the statutory objectives of administration?

Answer 45

The statutory objectives of administration are: (1) to rescue the company as a going concern, (2) to achieve a better result for the company’s creditors as a whole than would be likely if the company were wound up, and (3) to realize the company’s property to make distributions to secure or preferential creditors.

Question 46

What are the four tests for when a company is deemed unable to pay its debts according to Section 123 of the Insolvency Act 1986?

Answer 46

The four tests for when a company is deemed unable to pay its debts are: being unable to pay debts as they fall due (cash flow test), having liabilities greater than assets (balance sheet test), not complying with a statutory demand for a debt over £750, and failing to pay a creditor to satisfy enforcement of a judgment debt.

Question 47

What obligations do directors have towards companies in financial difficulties?

Answer 47

Directors must continually review the financial performance of a company and recognize when it is facing financial difficulties. Examples of financial difficulty include having many unpaid creditors, a fully drawn overdraft facility with no further credit available, or loans and liabilities exceeding the value of assets.

Question 48

What is the role of an administrator in the administration process?

Answer 48

The administrator acts in the interests of all the creditors to achieve the objectives of administration. They have wide powers to manage the company, take possession and sell its property, and must perform their functions with the objective of achieving one of the statutory objectives.

Question 49

What is the order of priority in payment during the liquidation process?

Answer 49

The order of priority in payment during the liquidation process is as follows: 1) Liquidator’s fees and expenses of preserving and realizing assets subject to fixed charges, 2) Amount due to fixed charge creditor out of the proceeds of selling assets subject to the fixed charge, 3) Liquidator’s other remuneration, costs, and expenses, 4) Preferential creditors (employees and HMRC), 5) Creation of the prescribed part fund for unsecured creditors, 6) Amount due to creditors with floating charges, 7) Unsecured/trade creditors, 8) Interest owed to unsecured creditors, 9) Shareholders.

Question 50

How does the appointment of an administrator affect the directors’ powers?

Answer 50

Once an administrator is appointed, the directors are unable to exercise any of their management powers without the consent of the administrator.

Question 51

What is receivership?

Answer 51

Receivership is an enforcement procedure conducted in the interests of a secured creditor. There are three types of receivers that we will consider: administrative receivers (now a rare procedure), fixed charge receivers, and court-appointed receivers.

Question 52

What is the purpose of a moratorium in the administration process?

Answer 52

The appointment of an administrator gives rise to a moratorium, which temporarily freezes creditor actions against the company, protecting it from hostile actions.

Question 53

What happens to a company’s assets subject to fixed charges in the liquidation process?

Answer 53

The assets subject to fixed charges are realized first by the liquidator, and the proceeds are used to pay the liquidator’s costs of preserving and realizing those assets, followed by the amount due to the fixed charge creditor out of the proceeds of selling the assets. If the proceeds are insufficient to discharge the debt in full, the unpaid part of the debt will rank as unsecured debt.

Question 54

What is the purpose of the pre-insolvency moratorium introduced by the Corporate Insolvency and Governance Act 2020?

Answer 54

The purpose of the pre-insolvency moratorium is to provide struggling companies that are not yet in a formal insolvency process with a period during which creditors are unable to take action, allowing the company time to negotiate agreements with its creditors or propose formal arrangements.

Question 55

Who can appoint an administrative receiver?

Answer 55

When applicable, a secured creditor with fixed and floating charges over all of the company’s assets may appoint an administrative receiver.

Question 56

What are the different types of receivership?

Answer 56

The different types of receivership are administrative receivership, fixed charge receivership, and court-appointed receivership.

Question 57

What powers does the liquidator have to manage the company during the liquidation process?

Answer 57

The liquidator has the power to sell the company’s property, execute deeds and other documents in the name of the company, raise money on the security of the company’s assets, make or draw bills of exchange or promissory notes, appoint an agent to do business on behalf of the liquidator, and perform other necessary tasks to wind up the company’s affairs and distribute its assets.

Question 58

What are the duties of a fixed charge receiver?

Answer 58

Fixed charge receivers are appointed by the holders of a fixed charge pursuant to the terms of the relevant security document. They are appointed to enforce the security, manage and sell the secured assets (most commonly, land and buildings), and use the sale proceeds to repay the debt owed to their appointor.

Question 59

What is the purpose of an administrative receiver?

Answer 59

An administrative receiver is appointed for the benefit of a secured creditor and has the power to enforce security over the company’s assets.

Question 60

How are court-appointed receivers different from other types of receivers?

Answer 60

Court-appointed receivers are relatively rare and are appointed by the court. Their powers and duties are set out in the court order. Appointments are sometimes made where shareholders are locked in dispute, and receivers may also be appointed by the court under the Proceeds of Crime Act 2002 and associated legislation.

Question 61

What happens during liquidation?

Answer 61

During liquidation, all employees will be automatically dismissed, and the directors lose their powers and are automatically dismissed from office. There are two main types of liquidation: compulsory liquidation or voluntary (members’ or creditors’ voluntary liquidation). A members’ voluntary liquidation applies only to solvent companies, while compulsory liquidation may be ordered by the court on various grounds, with the most common ground being that the company will be unable to pay its debts. The role of the liquidator is to realize the assets of the company and distribute them to creditors in accordance with the statutory order of priority.

Question 62

What happens when a notice of intention to appoint an administrator is filed at court?

Answer 62

When a notice of intention to appoint an administrator is filed at court, an interim moratorium temporarily freezing creditor actions comes into effect until the administration order is made or the court dismisses the application.

Question 63

What happens if a company has granted a qualifying floating charge (QFC) in the appointment of an administrator?

Answer 63

If a company has granted a QFC, the directors must send the notice of intention to appoint (NOI) to the holder of the QFC. The QFC then has 5 business days to appoint its own choice of administrator. If the QFC does not do so, the directors can proceed with their choice of administrator.

Question 64

Why do companies enter into liquidation after going through another insolvency procedure?

Answer 64

It is common for companies to enter into liquidation after having been through a different insolvency procedure, such as administration, first. Liquidation is often the end of the road for the company, and the liquidator has limited powers to carry on the business. Companies may choose to enter liquidation to wind up the business when other options have been exhausted.

Question 65

What happens to employees during liquidation?

Answer 65

During liquidation, all employees will be automatically dismissed.

Question 66

What is the role of a liquidator in liquidation?

Answer 66

The role of the liquidator is to realize the assets of the company and distribute them in accordance with the statutory order of priority. The liquidator takes control of the company and carries out the winding-up process.

Question 67

What is the purpose of a members’ voluntary liquidation?

Answer 67

A members’ voluntary liquidation applies only to solvent companies where the directors swear a statutory declaration of solvency. The purpose of this procedure is to wind up the company’s affairs and distribute its assets among the members.

Question 68

What is the purpose of a creditors’ voluntary liquidation?

Answer 68

A creditors’ voluntary liquidation is a type of voluntary liquidation that occurs when a company is insolvent. The purpose of this procedure is to wind up the company’s affairs and distribute its assets among the creditors.

Question 69

Who can be appointed as an administrative receiver?

Answer 69

Only a licensed insolvency practitioner can be appointed as an administrative receiver.

Question 70

Who usually presents a bankruptcy petition?

Answer 70

A bankruptcy petition is usually presented by a creditor, but sometimes it can be presented by the debtor.

Question 71

What are the grounds for a bankruptcy order?

Answer 71

The grounds for a bankruptcy order include the debtor’s inability to pay their debts as evidenced by a statutory demand that has not been satisfied within three weeks or an unsatisfied execution of a judgment. If the court is satisfied with the grounds and other requirements, it has the discretion to make a bankruptcy order.

Question 72

Who becomes the first trustee in bankruptcy upon the making of a bankruptcy order?

Answer 72

Upon the making of a bankruptcy order, the Official Receiver becomes the first trustee in bankruptcy unless the court orders otherwise. However, a majority of creditors can seek the appointment of another person as Trustee.

Question 73

What restrictions apply to a bankrupt after the making of a bankruptcy order?

Answer 73

After the making of a bankruptcy order, the bankrupt is prohibited from acting as a director or being involved in the management of a company, obtaining credit over £500 without disclosing the bankruptcy, giving gifts, and practicing certain professions. They are also deprived of ownership of their property except for reasonable domestic needs.

Question 74

What powers does the Trustee have in a bankruptcy?

Answer 74

The Trustee has wide statutory powers to sell or otherwise deal with the assets in the estate, including carrying on the bankrupt’s business, selling assets, granting security over them, challenging prior undervalue or preferences transactions, and paying dividends to creditors in accordance with a statutory order of priority.

Question 75

What is the order of priority for payments in a bankruptcy?

Answer 75

The order of priority for payments in a bankruptcy is: 1) Secured creditors (limited to the value of the security), 2) Expenses of the bankruptcy including the Trustee’s remuneration, 3) Two tiers of preferential creditors, 4) Ordinary unsecured creditors, 5) Statutory interest, 6) Debts of a spouse, and 7) Any surplus payable to the bankrupt.

Question 76

What duties does a bankrupt have to the Trustee?

Answer 76

A bankrupt has a number of duties to the Trustee, including providing information and assistance to enable the Trustee to carry out their functions. Failure to comply with these obligations is a criminal offense and can result in imprisonment and fines.

Question 77

When is a bankrupt automatically discharged from bankruptcy?

Answer 77

A bankrupt is automatically discharged from bankruptcy after a maximum period of one year. Discharge means that the bankrupt is released from most of the bankruptcy debts and personal restrictions.

Question 78

What are Bankruptcy Restriction Orders (BROs) and Bankruptcy Restriction Undertakings (BRUs)?

Answer 78

Bankruptcy Restriction Orders (BROs) are court orders that can be applied for if the conduct of the bankrupt warrants it. They can restrict the bankrupt from acting as a director or obtaining credit without disclosure. Bankruptcy Restriction Undertakings (BRUs) are agreements offered by the bankrupt instead of going through court process, which have the same effect as BROs.

Question 79

What are voidable transactions in bankruptcy?

Answer 79

Voidable transactions in bankruptcy are transactions that can be challenged by the Trustee with the aim of increasing the assets available to creditors. These include transactions at an undervalue, preferences, and transactions defrauding creditors. If the requirements for these transactions are met, the court can make orders to restore the position to what it would have been without the transaction.

Question 80

What is a transaction at an undervalue (TUV) in bankruptcy?

Answer 80

A transaction at an undervalue (TUV) in bankruptcy refers to a transaction that involves a gift, consideration of marriage or civil partnership, or consideration significantly less than what the bankrupt provided. The relevant time for a TUV is within 5 years preceding the day of the presentation of the bankruptcy petition.

Question 81

What are preferences in bankruptcy?

Answer 81

Preferences in bankruptcy refer to actions taken by the individual that put a creditor in a better position than they would have been in the event of the individual being made bankrupt. Preferences must be within 6 months preceding the day of the presentation of the petition if to an unconnected person, or within 2 years if to an associate.

Question 82

What are transactions defrauding creditors (TDCs) in bankruptcy?

Answer 82

Transactions defrauding creditors (TDCs) in bankruptcy involve transactions at an undervalue with the intent to defraud creditors or put assets beyond their reach. There is no need to prove insolvency, and there is no relevant time limit for bringing a TDC claim.

Question 83

What happens to employees and directors during a bankruptcy procedure?

Answer 83

During a bankruptcy procedure, employees remain employed, but directors cannot exercise their management powers without the consent of the Trustee. If the company is wound up, employees may be dismissed, and directors may be removed from office.

Question 84

Can a bankrupt continue trading during a bankruptcy procedure?

Answer 84

In an administration, the administrators can carry on trading the business to achieve the main objective. However, in a compulsory liquidation, the company will cease trading.

Question 85

How does a company exit the bankruptcy procedure?

Answer 85

A company can exit the bankruptcy procedure by implementing a restructuring plan, scheme of arrangement, or Company Voluntary Arrangement (CVA) to restructure the rights of creditors. If the company is returned to solvency, it can be handed back to the directors. Alternatively, the company can enter liquidation for a distribution to creditors.

Question 86

What are the consequences of breach of a Bankruptcy Restriction Order (BRO)?

Answer 86

Breach of a Bankruptcy Restriction Order (BRO) is a criminal offense punishable by fine and/or imprisonment. Additionally, the bankrupt runs the risk of having their automatic discharge suspended.

Question 87

What is a transaction at an undervalue (TUV) and what are the requirements for bringing a claim for TUV?

Answer 87

· Within 5 years preceding the day of presentation of bankruptcy petition
· Individual insolvent at time / as a result (this is presumed with associates)

Question 88

What are preferences in the context of bankruptcy and what are the requirements for bringing a claim for a preference?

Answer 88

Preferences are actions taken by an individual that put a creditor in a better position than they would have been in the event of bankruptcy. To bring a claim for a preference, it must be shown that the action took place within 6 months preceding the bankruptcy petition (or 2 years if to an associate) and that the individual was insolvent at the time or became insolvent as a result.

Question 89

What are transactions defrauding creditors (TDC) in the context of bankruptcy and how do they differ from other voidable transactions?

Answer 89

Transactions defrauding creditors involve transactions at an undervalue with the intent to defraud creditors or put assets beyond their reach. Unlike other voidable transactions, there is no requirement to prove insolvency, and there is no relevant time limit for bringing a TDC claim.

Question 90

When is the presumption of insolvency availible for transactions?

Answer 90

o Insolvency of the bankrupt is presumed (subject to rebuttal by the associate) where a transaction at an undervalue is entered into with an ‘associate’ of the bankrupt (see s 435 IA86 for the definition of associate).

Question 91

What is the duration of a Bankruptcy Restriction Order (BRO) and what restrictions does it impose on the bankrupt?

Answer 91

A BRO can operate for a period of two to fifteen years. During this time, the bankrupt is unable to act as a director or obtain credit over £500 without disclosing that they are subject to a BRO.

Question 92

What is the purpose of a bankruptcy restriction undertaking (BRU) and how does it compare to a Bankruptcy Restriction Order (BRO)?

Answer 92

Instead of being subject to court process, a bankrupt can offer the Secretary of State a bankruptcy restriction undertaking (BRU), which, if accepted, will have the same effect as a BRO. It provides an alternative way to impose restrictions on the bankrupt’s activities.

Question 93

What are the consequences of breaching a Bankruptcy Restriction Order (BRO)?

Answer 93

Breach of a BRO is a criminal offense punishable by fine and/or imprisonment. It is important for bankrupt individuals to comply with the restrictions imposed by a BRO.