Insolvency Act 1986, Schedule 4A, paragraph 2

SCHEDULE 4A

2(1)The court shall grant an application for a bankruptcy restrictions order if it thinks it appropriate having regard to the conduct of the bankrupt (whether before or after the making of the bankruptcy order).

(2)The court shall, in particular, take into account any of the following kinds of behaviour on the part of the bankrupt—

(a)failing to keep records which account for a loss of property by the bankrupt, or by a business carried on by him, where the loss occurred in the period beginning 2 years before [F1443 the making of the bankruptcy application or (as the case may be) the presentation of the bankruptcy petition and ending with the date of the application for the bankruptcy restrictions orderF1443] ;

(b)failing to produce records of that kind on demand by the official receiver or the trustee;

(c)entering into a transaction at an undervalue;

(d)giving a preference;

(e)making an excessive pension contribution;

(f)a failure to supply goods or services which were wholly or partly paid for which gave rise to a claim provable in the bankruptcy;

(g)trading at a time before commencement of the bankruptcy when the bankrupt knew or ought to have known that he was himself to be unable to pay his debts;

(h)incurring, before commencement of the bankruptcy, a debt which the bankrupt had no reasonable expectation of being able to pay;

(i)failing to account satisfactorily to the court, the official receiver or the trustee for a loss of property or for an insufficiency of property to meet bankruptcy debts;

(j)carrying on any gambling, rash and hazardous speculation or unreasonable extravagance which may have materially contributed to or increased the extent of the bankruptcy or which took place between [F1444 the making of the bankruptcy application or (as the case may be) the presentation of the bankruptcy petitionF1444] and commencement of the bankruptcy;

(k)neglect of business affairs of a kind which may have materially contributed to or increased the extent of the bankruptcy;

(l)fraud or fraudulent breach of trust;

(m)failing to cooperate with the official receiver or the trustee.

(3)The court shall also, in particular, consider whether the bankrupt was an undischarged bankrupt at some time during the period of six years ending with the date of the bankruptcy to which the application relates.

(4)For the purpose of sub-paragraph (2)—

  • F1445 ...

  • “excessive pension contribution” shall be construed in accordance with section 342A,

  • “preference” shall be construed in accordance with section 340, and

  • “undervalue” shall be construed in accordance with section 339.

Definitions used in Schedule 4A, paragraph 2 1

bankruptcy debt

(a) in relation to a bankrupt, means a person to whom any of the bankruptcy debts is owed (being, in the case of an amount falling within paragraph (c) of the definition in section 382(1) or “bankruptcy debt”, the person in respect of whom that amount is specified in the criminal bankruptcy order in question), and

Defined in s.383(1) · see it in the full Act

Cases considering Schedule 4A, paragraph 2 6

Jody Kennedy v The Official Receiver

[2022] EWHC 1973 (Ch) · 28 July 2022Interprets

The court treated paragraph 2 as supplementing the general test by identifying conduct which must be taken into account, without making the statutory list exhaustive. (see paras [27]-[30])

Michael v The Official Receiver

[2013] EWHC 4286 (Ch) · 31 July 2012

The provision was applied to confirm that failure to keep records accounting for a business loss may support a bankruptcy restrictions order, despite repeal of the former criminal offence (see para [27]).

Spencer Michael v (1) the Official Receiver (2) Secretary of State for Business, Innovation and Skills

[2010] EWHC 2246 (Ch) · 15 July 2010Defines

Applies paragraph 2 as identifying the substantive statutory basis for a bankruptcy restrictions order and the conduct relevant to that application. (see paras [8], [35]-[37]) Applies sub-paragraph 2(1) as establishing when the court must grant a final bankruptcy restrictions order, subject to appropriateness having regard to the bankrupt’s conduct. (see para [36]) Applies sub-paragraph 2(2) as listing conduct that the court must take into account. The list is not confined to fraud and includes failures concerning records and transactions at an undervalue. (see para [37])

What each judgment says about Schedule 4A, paragraph 2 is in the case-law panel in the full Act.

Amendments and notes

3 notes from legislation.gov.uk

Amendments

  1. F1443Words in Sch. 4A para. 2(2)(a) substituted (6.4.2016) by Enterprise and Regulatory Reform Act 2013 (c. 24), s. 103(3), Sch. 19 para. 63(2)(a); S.I. 2016/191, art. 2 (with art. 3)
  2. F1444Words in Sch. 4A para. 2(2)(j) substituted (6.4.2016) by Enterprise and Regulatory Reform Act 2013 (c. 24), s. 103(3), Sch. 19 para. 63(2)(b); S.I. 2016/191, art. 2 (with art. 3)
  3. F1445Words in Sch. 4A para. 2(4) omitted (6.4.2016) by virtue of Enterprise and Regulatory Reform Act 2013 (c. 24), s. 103(3), Sch. 19 para. 63(3); S.I. 2016/191, art. 2 (with art. 3)