Insolvency Act 1986

[F1Disposals of property free from charges etcU.K.

A31Disposal of charged property free from chargeU.K.

(1)During a moratorium, the company may, with the permission of the court, dispose of property which is subject to a security interest as if it were not subject to the security interest.

(2)The court may give permission under subsection (1) only if the court thinks that it will support the rescue of the company as a going concern.

(3)Where the court gives permission under subsection (1) other than in relation to a floating charge, the company must apply the following towards discharging the sums secured—

(a)the net proceeds of disposal of the property, and

(b)any money required to be added to the net proceeds so as to produce the amount determined by the court as the net amount which would be realised on a sale of the property in the open market by a willing vendor.

(4)Where the permission relates to two or more security interests, the condition in subsection (3) requires the application of money in the order of the priorities of the security interests.

(5)Where property subject to a floating charge is disposed of under subsection (1), the holder of the floating charge has the same priority in respect of acquired property as they had in respect of the property disposed of.

(6)In subsection (5) “acquired property” means property of the company which directly or indirectly represents the property disposed of.

(7)Where the court makes an order giving permission under subsection (1), the directors must, within the period of 14 days beginning with the date of the order, send a copy of it to the registrar of companies.

(8)If the directors fail to comply with subsection (7), any director who did not have a reasonable excuse for the failure commits an offence.

(9)Where property in Scotland is disposed of under subsection (1), the company must grant to the disponee an appropriate document of transfer or conveyance of the property, and—

(a)that document, or

(b)recording, intimation or registration of that document (where recording, intimation or registration of the document is a legal requirement for completion of title to the property),

has the effect of disencumbering the property of or, as the case may be, freeing the property from, the security interest.

(10)If a company fails to comply with subsection (3) or (9)—

(a)the company commits an offence, and

(b)any officer of the company who without reasonable excuse authorised or permitted the failure commits an offence.

(11)Subsection (1) does not apply in relation to any property which is subject to a financial collateral arrangement, a market charge, a system-charge or a collateral security (as defined by section A27).

A32Disposal of hire-purchase propertyU.K.

(1)During a moratorium, the company may, with the permission of the court, dispose of goods which are in the possession of the company under a hire-purchase agreement as if all of the rights of the owner under the agreement were vested in the company.

(2)The court may give permission under subsection (1) only if the court thinks that it will support the rescue of the company as a going concern.

(3)Where the court gives permission under subsection (1), the company must apply the following towards discharging the sums payable under the hire-purchase agreement—

(a)the net proceeds of disposal of the goods, and

(b)any additional money required to be added to the net proceeds so as to produce the amount determined by the court as the net amount which would be realised on a sale of the goods in the open market by a willing vendor.

(4)If a company fails to comply with subsection (3)—

(a)the company commits an offence, and

(b)any officer of the company who without reasonable excuse authorised or permitted the failure commits an offence.

(5)Where the court makes an order giving permission under subsection (1), the directors must, within the period of 14 days beginning with the date of the order, send a copy of it to the registrar of companies.

(6)If the directors fail to comply with subsection (5), any director who did not have a reasonable excuse for the failure commits an offence.

(7)In Scotland, where goods in the possession of the company under a hire-purchase agreement are disposed of under subsection (1), the disposal has the effect of extinguishing, as against the disponee, all rights of the owner of the goods under the agreement.]