Insolvency Act 1986
The Insolvency Act 1986 consolidated the law relating to corporate and personal insolvency in England and Wales. The Act governs the administration of insolvent companies, including liquidation (both compulsory and voluntary), administration, receivership, and voluntary arrangements. For personal insolvency, it governs bankruptcy, individual voluntary arrangements (IVAs), and debt relief orders. The Act imposes duties on directors of insolvent companies, including the prohibition on wrongful trading and the duty to consider creditor interests when a company is insolvent. The Act has been amended by the Enterprise Act 2002 and the Corporate Insolvency and Governance Act 2020.
Legal area: Corporate law governs the formation, operation, and dissolution of business organisations, including the rights and duties of directors, shareholders, and other stakeholders.
Citation: Insolvency Act 1986 (1986 c 45)
Full text: https://www.legislation.gov.uk/ukpga/1986/45
Key Provisions
- Part I: Company voluntary arrangements (CVAs)
- Part II: Administration orders (company rescue procedure)
- Part IV: Winding up of companies (liquidation)
- Section 213: Fraudulent trading (criminal liability)
- Section 214: Wrongful trading (civil liability of directors)
- Part VIII: Individual voluntary arrangements (IVAs)
- Part IX: Bankruptcy (individual insolvency)
- Schedule B1: Administration (inserted by Enterprise Act 2002)
Significance
The Insolvency Act 1986 is the primary insolvency legislation, extensively judicially interpreted and practically applied. The wrongful trading provision (section 214) allows courts to require directors to contribute to company assets where they continued trading at creditors’ risk. The Enterprise Act 2002 substantially reformed the Act, making administration the primary corporate rescue mechanism and abolishing administrative receivership for most floating charges. The Corporate Insolvency and Governance Act 2020 made further reforms including a new moratorium procedure and restructuring plans.