Insolvency Act 1986, section 256

Nominee’s report on debtor’s proposal

Part VIII Individual Voluntary Arrangements

(1)Where an interim order has been made on an application under section 253, the nominee shall, before the order ceases to have effect, submit a report to the court stating—

(a)[F580 whether, in his opinion, the voluntary arrangement which the debtor is proposing has a reasonable prospect of being approved and implemented, [F581 andF581]

(aa)F580] F583whether, in his opinion, [F582the debtor's creditors shouldF582] consider the debtors’ proposal ...

F584(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2)For the purpose of enabling the nominee to prepare his report the debtor shall submit to the nominee—

(a)a document setting out the terms of the voluntary arrangement which the debtor is proposing, and

(b)a statement of his affairs containing—

(i)such particulars of his creditors and of his debts and other liabilities and of his assets as may be prescribed, and

(ii)such other information as may be prescribed.

[F585 (3)The court may—

(a)on an application made by the debtor in a case where the nominee has failed to submit the report required by this section or has died, or

(b)on an application made by the debtor or the nominee in a case where it is impracticable or inappropriate for the nominee to continue to act as such,

direct that the nominee shall be replaced as such by another person qualified to act as an insolvency practitioner, or authorised to act as nominee, in relation to the voluntary arrangement.

(3A)The court may, on an application made by the debtor in a case where the nominee has failed to submit the report required by this section, direct that the interim order shall continue, or (if it has ceased to have effect) be renewed, for such further period as the court may specify in the direction.F585]

(4)The court may, on the application of the nominee, extend the period for which the interim order has effect so as to enable the nominee to have more time to prepare his report.

(5)If the court is satisfied on receiving the nominee’s report that [F586the debtor's creditors shouldF586] consider the debtor’s proposal, the court shall direct that the period for which the interim order has effect shall be extended, for such further period as it may specify in the direction, for the purpose of enabling the debtor’s proposal to be considered by his creditors in accordance with the following provisions of this Part.

(6)The court may discharge the interim order if it is satisfied, on the application of the nominee—

(a)that the debtor has failed to comply with his obligations under subsection (2), or

(b)that for any other reason it would be inappropriate for [F587the debtor's creditorsF587] to consider the debtor’s proposal.

Definitions used in section 256 1

the debtor

(2) In Schedule 6 “the debtor” means the company or the individual concerned.

Defined in s.386(2) · see it in the full Act

Cases considering section 256 7

Bramston v Haut

[2012] EWCA Civ 1637 · 14 December 2012

The nominee had to provide an independent opinion on the proposal’s prospects and whether creditors should meet. A report stating only the debtor’s satisfaction did not comply. (see paras [60]; [63]-[64])

Tradition (UK) Ltd v Ahmed & Ors

[2008] EWHC 2946 (Ch) · 5 December 2008Interprets

The court interpreted the nominee’s report obligation as requiring independent scrutiny of the proposal’s seriousness, viability, prospects of approval and implementation, and the fairness of putting it to creditors. In the particular circumstances the nominee failed to investigate sufficiently before recommending a meeting (see paras [218]-[233]). The provision was identified as requiring the debtor to submit the proposal and Statement of Affairs to the nominee so that the nominee could prepare the report. The court used this as part of the statutory context for the nominee’s scrutiny obligations (see para [41]). The court noted that the nominee could apply for an extension of the interim order to obtain more time for enquiries. This reinforced the conclusion that the meeting had been summoned prematurely (see paras [40], [225], [232]). The court described the statutory mechanism for extending an interim order where a creditors’ meeting should be summoned. It formed part of the procedural background (see para [40]).

Price & Anor v Davis & Anor

[2014] EWCA Civ 26 · 21 January 2014

The court identified section 256 as a source of the report which may lead to the original creditors’ meeting being summoned. (see paras [3], [7])

1 more judgment, and what each says about section 256, are in the case-law panel in the full Act.

Amendments and notes

9 notes from legislation.gov.uk

Amendments

  1. F580Words in s. 256(1) inserted (1.1.2003) by 2000 c. 39, s. 3, Sch. 3 para. 6(a); S.I. 2002/2711, art. 2 (subject to transitional provisions in arts. 3-5)
  2. F581Word in s. 256(1)(a) inserted (26.5.2015 for specified purposes, 6.4.2017 for E.W. in so far as not already in force) by Small Business, Enterprise and Employment Act 2015 (c. 26), s. 164(1), Sch. 9 para. 61(2); S.I. 2015/1329, reg. 3(d); S.I. 2016/1020, reg. 4(e) (with reg. 5) (as amended by S.I. 2017/363, reg. 3)
  3. F583Word in s. 256(1)(aa) omitted (26.5.2015 for specified purposes, 6.4.2017 for E.W. in so far as not already in force) by virtue of Small Business, Enterprise and Employment Act 2015 (c. 26), s. 164(1), Sch. 9 para. 61(3)(b); S.I. 2015/1329, reg. 3(d); S.I. 2016/1020, reg. 4(e) (with reg. 5) (as amended by S.I. 2017/363, reg. 3)
  4. F582Words in s. 256(1)(aa) substituted (26.5.2015 for specified purposes, 6.4.2017 for E.W. in so far as not already in force) by Small Business, Enterprise and Employment Act 2015 (c. 26), s. 164(1), Sch. 9 para. 61(3)(a); S.I. 2015/1329, reg. 3(d); S.I. 2016/1020, reg. 4(e) (with reg. 5) (as amended by S.I. 2017/363, reg. 3)
  5. F584S. 256(1)(b) omitted (26.5.2015 for specified purposes, 6.4.2017 for E.W. in so far as not already in force) by virtue of Small Business, Enterprise and Employment Act 2015 (c. 26), s. 164(1), Sch. 9 para. 61(4); S.I. 2015/1329, reg. 3(d); S.I. 2016/1020, reg. 4(e) (with reg. 5) (as amended by S.I. 2017/363, reg. 3)
  6. F585S. 256(3)(3A) substituted for s. 256(3) (1.1.2003) by 2000 c. 39, s. 3, Sch. 3 para. 6(b); S.I. 2002/2711, art. 2 (subject to transitional provisions in arts. 3-5)
  7. F586Words in s. 256(5) substituted (26.5.2015 for specified purposes, 6.4.2017 for E.W. in so far as not already in force) by Small Business, Enterprise and Employment Act 2015 (c. 26), s. 164(1), Sch. 9 para. 61(5); S.I. 2015/1329, reg. 3(d); S.I. 2016/1020, reg. 4(e) (with reg. 5) (as amended by S.I. 2017/363, reg. 3)
  8. F587Words in s. 256(6) substituted (26.5.2015 for specified purposes, 6.4.2017 for E.W. in so far as not already in force) by Small Business, Enterprise and Employment Act 2015 (c. 26), s. 164(1), Sch. 9 para. 61(6); S.I. 2015/1329, reg. 3(d); S.I. 2016/1020, reg. 4(e) (with reg. 5) (as amended by S.I. 2017/363, reg. 3)

Modifications

  1. C921Ss. 256–263 applied with modifications by S.I. 1986/1999, art. 3, Sch. I Pt. III