Insolvency Act 1986, section 176

Preferential charge on goods distrained , etc

Part IV Winding Up of Companies Registered under the Companies Acts

(1)This section applies where a company is being wound up by the court in England and Wales, and is without prejudice to section 128 (avoidance of attachments, etc.).

[F380 (2)Subsection (2A) applies where—

(a)any person (whether or not a landlord or person entitled to rent) has distrained upon the goods or effects of the company, or

(b)Her Majesty's Revenue and Customs has been paid any amount from an account of the company under Part 1 of Schedule 8 to the Finance (No. 2) Act 2015 (enforcement by deduction from accounts),

in the period of 3 months ending with the date of the winding-up order.

(2A)Where this subsection applies—

(a)in a case within subsection (2)(a), the goods or effects, or the proceeds of their sale, and

(b)in a case within subsection (2)(b), the amount in question,

is charged for the benefit of the company with the preferential debts of the company to the extent that the company's property is for the time being insufficient for meeting those debts.F380]

(3)Where by virtue of a charge under subsection [F381(2A)F381] any person surrenders any goods or effects to a company or makes a payment to a company, that person ranks, in respect of the amount of the proceeds of sale of those goods or effects by the liquidator or (as the case may be) the amount of the payment, as a preferential creditor of the company, except as against so much of the company’s property as is available for the payment of preferential creditors by virtue of the surrender or payment.

Definitions used in section 176 2

the company

2 Section 233B does not apply in relation to a contract for the supply of goods or services to a company (“the company”) where any of paragraphs 3 to 11 applies.

Defined in Sch.4ZZA para.2 · see it in the full Act
any amount

(2) In sub-paragraph (1), the reference to “any amount” is subject to any regulations under section 99(1) of the Finance Act 2020 .

Defined in Sch.6 para.15D(2) · see it in the full Act

Cases considering section 176 3

National Westminster Bank plc (Respondents) v. Spectrum Plus Limited and others and others (Appellants)

[2005] UKHL 41 · 30 June 2005

The provision was identified as part of the statutory regime governing the ranking of preferential debts against Scottish floating charges.

Walker & Anor v National Westminster Bank Plc & Anor

[2016] EWHC 315 (Ch) · 25 February 2016

Confirms the potential application of the prescribed-part regime where a redress payment falls within a floating charge, meaning unsecured creditors may have an interest in its distribution (see para [30]).

Irish Bank Resolution Corporation Ltd v DTZ Debenham Tie Leung Ltd

[2013] EWHC 596 (Comm) · 7 March 2013

Identifies the statutory provision inserted following Leyland Daf and treated as reversing that decision’s effect in England and Wales from 6 April 2008 (see para [13]).

What each judgment says about section 176 is in the case-law panel in the full Act.

Amendments and notes

5 notes from legislation.gov.uk

Amendments

  1. F379Word in s. 176 heading inserted (18.11.2015) by Finance (No. 2) Act 2015 (c. 33), Sch. 8 para. 30(4)
  2. F380S. 176(2)(2A) substituted for s. 176(2) (18.11.2015) by Finance (No. 2) Act 2015 (c. 33), Sch. 8 para. 30(2)
  3. F381Word in s. 176(3) substituted (18.11.2015) by Finance (No. 2) Act 2015 (c. 33), Sch. 8 para. 30(3)

Modifications

  1. C503S. 176 applied (with modifications) (17.2.2009 for certain purposes, otherwise 21.2.2009) by Banking Act 2009 (c. 1), ss. 103, 263(1)(2) (with s. 247); S.I. 2009/296, arts. 2, 3, Sch. para. 2
  2. C504S. 176 applied (with modifications) (8.7.2021) by The Payment and Electronic Money Institution Insolvency Regulations 2021 (S.I. 2021/716), regs. 2, 37 (with reg. 5) (as amended (4.1.2024) by S.I. 2023/1399, regs. 1(2), 4, 11)