Insolvency Act 1986, section 260

Effect of approval

Part VIII Individual Voluntary Arrangements

(1)This section has effect where [F624pursuant to section 257 the debtor's creditors decide to approveF624] the proposed voluntary arrangement (with or without modifications).

(2)The approved arrangement—

(a)takes effect as if made by the debtor[F625 at the time the creditors decided to approve the proposalF625] , and

[F626 (b)binds every person who in accordance with the rules—

(i)was entitled to vote [F627 in the creditors' decision procedure by which the decision to approve the proposal was madeF627] , or

(ii)would have been so entitled if he had had notice of it,

as if he were a party to the arrangement.

(2A)If—

(a)when the arrangement ceases to have effect any amount payable under the arrangement to a person bound by virtue of subsection (2)(b)(ii) has not been paid, and

(b)the arrangement did not come to an end prematurely,

the debtor shall at that time become liable to pay to that person the amount payable under the arrangement.F626]

F628(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)Any interim order in force in relation to the debtor immediately before the end of the period of 28 days beginning with the day on which the report with respect to the creditors’ [F629decisionF629] was made to the court under section 259 ceases to have effect at the end of that period.

This subsection applies except to such extent as the court may direct for the purposes of any application under section 262 below.

(5)Where proceedings on a bankruptcy petition have been stayed by an interim order which ceases to have effect under subsection (4), that petition is deemed, unless the court otherwise orders, to have been dismissed.

Definitions used in section 260 3

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
party

(3) In section 72B(1) and this paragraph “party” to an arrangement includes a party to an agreement which—

(a)forms part of the arrangement,

(b)provides for the raising of finance as part of the arrangement, or

(c)is necessary for the purposes of implementing the arrangement.

Defined in Sch.2A para.1(3) · see it in the full Act

(4) “Party” to an arrangement includes a party to an agreement which—

(a)forms part of the arrangement,

(b)provides for the raising of finance as part of the arrangement, or

(c)is necessary for the purposes of implementing the arrangement.

Defined in Sch.ZA1 para.19(4) · 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 260 23

Price & Anor v Davis & Anor

[2014] EWCA Civ 26 · 21 January 2014Interprets

The court interpreted section 260 so that its statutory binding applies to approvals at further meetings as well as original meetings. A literal construction limited to the original meeting would make Part VIII incoherent. (see paras [10], [36]-[45]) The court applied the statutory binding to creditors entitled to vote at the further meetings, including the Prices in respect of their later costs claim. (see paras [10], [18], [45])

Child Maintenance and Enforcement Commission v Beesley & Anor

[2010] EWCA Civ 1344 · 24 November 2010Interprets

The provision identifies when the statutory effect of an approved IVA arises. (see para [9]) The court interprets the binding effect of an approved IVA in light of the statutory insolvency scheme and the capacity of creditors to compromise liabilities. (see paras [9]; [57]-[65]) The provision states that an approved arrangement takes effect as if made by the debtor at the meeting. It is part of the court’s description of the IVA structure. (see para [9]) The court concludes that the Commission was not within the class of persons capable of being bound by an IVA because it could not compromise child support arrears. (see paras [2]; [63]; [65]) The provision identifies persons entitled to vote under the rules, whether or not present or represented. (see para [9]) The provision extends binding effect to persons who would have been entitled to vote if they had received notice. (see para [9])

Whitehead v Household Mortgage Corpn plc

[2002] EWCA Civ 1657 · 14 November 2002Interprets

The court applied section 260 in treating the approved arrangement as binding on eligible creditors and construing its terms as a consensual arrangement. The statutory hypothesis that a bound creditor consented to the arrangement required the court to construe its effect as if it were a consensual agreement. That construction did not imply a surrender of mortgage security.

3 more judgments, and what each says about section 260, are in the case-law panel in the full Act.

Amendments and notes

7 notes from legislation.gov.uk

Amendments

  1. F624Words in s. 260(1) 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. 67(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)
  2. F625Words in s. 260(2)(a) 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. 67(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)
  3. F626S. 260(2)(b)(2A) substituted for 260(2)(b) (1.1.2003) by 2000 c. 39, s. 3, Sch. 3 para. 10; S.I. 2002/2711, art. 2 (subject to transitional provisions in arts. 3-5)
  4. F627Words in s. 260(2)(b)(i) 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. 67(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)
  5. F628S. 260(3) omitted (1.10.2015) by virtue of Deregulation Act 2015 (c. 20), s. 115(7), Sch. 6 para. 2(11)(a) (with Sch. 6 para. 3); S.I. 2015/1732, art. 2(e)(i)
  6. F629Word in s. 260(4) 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. 67(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)

Modifications

  1. C929Ss. 256–263 applied with modifications by S.I. 1986/1999, art. 3, Sch. I Pt. III