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Bankruptcy and Company Winding Up

Volume 535: debated on Monday 7 November 2011

We are today launching a consultation about bankruptcy and company winding up.

The consultation document sets out detailed proposals to reform the application process for bankruptcy and compulsory winding up by replacing the current court route with a new administrative process. Uncontested applications would be determined by an adjudicator and the court would only be involved at the application stage to the extent that there is a dispute that can only be resolved by judicial intervention. I am placing copies of the consultation document in the Libraries of both Houses.

We propose allowing electronic applications to be made to an adjudicator, who will be a person appointed for that purpose by the Secretary of State and whose office would be within the Insolvency Service. Debtors who want to apply for bankruptcy for themselves would have the choice of submitting electronic or paper applications, and the option of making the requisite payment to enter the process by instalments. Where creditors are looking to instigate proceedings, a new mandatory pre-action process would incentivise debtors and creditors to communicate with each other and thereby reach a mutually satisfactory solution to the debt problem without recourse to a bankruptcy or winding-up application. This reflects our desire that people are empowered to make the right decisions for themselves about their finances, as set out in the Government response to the call for evidence about personal insolvency.

Litigation can be costly and time consuming. This new process should therefore deliver a more efficient service as well as saving valuable public and private resources. In order to ensure that the interests of both debtors and creditors are protected, the court would still have an important role. Not only would it decide the outcome of disputes, but certain petitions for the winding up of companies, such as those based on public interest grounds, would continue to be determined by the courts.

We intend actively to engage with interested parties throughout the consultation period, and welcome views on whether the proposals will deliver a workable and efficient application process for bankruptcy and most compulsory windings up. The consultation will close on 31 January 2012.