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United Kingdom

Bankruptcy

Updated 03/2011

Legal requirements

Entrepreneurs may be able to avoid bankruptcy by anticipating difficulties - if they keep a close eye on the financial situation of their business.

There is no single UK law on bankruptcy. Rules and procedures differ slightly between national regions. The term 'bankruptcy', which is used in England and Wales, is sometimes known as ‘sequestration’ in Scotland .

Responsible bodies

The Insolvency Service helps with the administration and investigation of bankrupt businesses and partnerships in England and Wales, and establishes the reasons for insolvency.

Scotland's Accountant in Bankruptcy (AIB) service administers personal bankruptcy proceedings and registers corporate insolvencies.

The Insolvency Service Northern Irelan d, in the Department of Enterprise, Trade and Investment (DETI) performs similar functions.

Entrepreneurs having experienced bankruptcy should not lose confidence in their ability to embark on a new business.

Administrative procedures

In the UK, bankruptcy is one way of dealing with debts you cannot pay. The bankruptcy proceedings free you from overwhelming debts so you can make a fresh start, subject to some restrictions; and make sure your assets are shared out fairly among creditors. However, there are disadvantages too relating to debt liabilities, potential impacts on employment and professional practice etc. Business Link provides an online interactive tool on alternatives to bankruptcy.

Bankruptcy procedure

Anyone can go bankrupt, including individual members of a partnership. There are different insolvency procedures for dealing with companies and with partnerships.

The Insolvency Service provides guidance on all relevant procedures:

Bankruptcy orders are usually made by presenting a completed bankruptcy petition at the High Court in London or at a UK county court close to where an individual or member of a partnership lives or trades.

The  Bankruptcy Court   deals with:

  • All bankruptcy petitions which may be presented in the London insolvency district;
  • Applications to set aside statutory demands;
  • Post-bankruptcy applications, the purpose of which is to obtain information about or achieve realisation of the bankrupt's assets;
  • Public examinations and applications for the suspension of the bankrupt's discharge period;
  • Applications for permission to act as director where the applicant is an undischarged bankrupt;
  • Some applications in connection with bankruptcy appeals.

While the  Companies Court   deals with, for instance:

  • Company winding up petitions;
  • Post-winding up applications, the purpose of which is to obtain information about or achieve realisation of company assets;
  • Petitions for the approval of the reduction in the capital or share premium account of companies;
  • A wide range of final applications relating to companies, such as applications to restore to the register, or to register charges out of time.

Enforced liquidation

 Compulsory liquidation is when the court orders a company to be wound up (a winding-up order) on the petition of an appropriate person. If there is more than one director, all the directors must jointly present the winding-up petition - a single director cannot present a winding up petition.

Resources

Programmes

Personal Debt Management Plans / Programmes (DMPs) consolidate unsecured debts into a single monthly repayment. The Scottish Government runs the Debt Arrangement Scheme (DAS), and there are also a number of independent debt management programmes and plans available to businesses.

Help & advice

Help & advice

Any debtor, who is either considering or being threatened with bankruptcy, must seek independent advice, preferably from an insolvency practitioner.

Free help is available from several agencies, including the Citizens Advice Bureau (CAB), the Consumer Credit Counselling Service (CCCS). The  UK Insolvency Helpline provides initial free advice and then actively refers clients to its professional network of Lawyers, Accountants, Licensed Insolvency Practitioners and Debt Management Firms specialising in money advice in the UK.

The National Debtline provides free confidential and independent advice on how to deal with debt problems. MoneyScotland gives advice on managing money and dealing with debt specifically to firms 'north of the border'.

 Business Link, Scottish Enterprise's Business Gateway and Northern Ireland's NI Business Info offer guidance on handling bankruptcy in their respective parts of the UK.

E-mail a business organisation near you

The EU runs a network (Enterprise Europe Network) of local business organisations in most European countries that may be able to help you.

Choose your country and town and enter your enquiry below.

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