Insolvency Act 1986, section 261

Additional effect on undischarged bankrupt

Part VIII Individual Voluntary Arrangements

(1)This section applies where—

(a)[F631 pursuant to section 257 the debtor's creditors decide to approveF631] the proposed voluntary arrangement (with or without modifications), and

(b)the debtor is an undischarged bankrupt.

(2)Where this section applies the court shall annul the bankruptcy order on an application made—

(a)by the bankrupt, or

(b)where the bankrupt has not made an application within the prescribed period, by the official receiver.

(3)An application under subsection (2) may not be made—

(a)during the period specified in section 262(3)(a) during which the [F632 creditors' decisionF632] can be challenged by application under section 262,

(b)while an application under that section is pending, or

(c)while an appeal in respect of an application under that section is pending or may be brought.

(4)Where this section applies the court may give such directions about the conduct of the bankruptcy and the administration of the bankrupt’s estate as it thinks appropriate for facilitating the implementation of the approved voluntary arrangement.F630]

Definitions used in section 261 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 261 3

Lonergan v Gedling Borough Council

[2009] EWCA Civ 1569 · 9 December 2009

The court applies section 261 to explain that a creditor’s petition must concern a debt owed by the debtor to the petitioning creditor, which regulation 49 supplies for council-tax liability. (see para [14])

Demarco v Perkins

[2006] EWCA Civ 188 · 23 January 2006

Applies the requirement that the debtor remain an undischarged bankrupt when annulment follows approval of an IVA. Automatic discharge made the IVA route unavailable after 26 March 2000, making the lost chance of timely IVA-based annulment the relevant loss. (see paras [6]-[9]; [14]-[17]; [68]; [72]) Confirms that an annulment application following the IVA creditors’ meeting could be made only after the prescribed period, so the IVA had to be established before automatic discharge. (see paras [8]-[9])

Bramston v Haut

[2012] EWCA Civ 1637 · 14 December 2012

Approval of the proposed arrangement was intended to permit an application for annulment of the bankruptcy. This consequence demonstrated that the six-week suspension was effectively final relief. (see para [25])

What each judgment says about section 261 is in the case-law panel in the full Act.

Amendments and notes

3 notes from legislation.gov.uk

Amendments

  1. F630S. 261 substituted (1.4.2004) by 2002 c. 40, ss. 264(1), 279, Sch. 22 para. 1 (with s. 249(6)); S.I. 2003/2093, art. 2(2), Sch. 2 (subject to arts. 3-8 (as amended by S.I. 2003/2332, art. 2))
  2. F631Words in s. 261(1)(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. 68(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. F632Words in s. 261(3)(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. 68(3); 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)