Enhancing Enterprise - In Business Spring 2003

01 April 2003

The Enterprise Act received Royal Assent on 7 November 2002. It covers a range of measures to enhance Enterprise through transforming our approach to bankruptcy and corporate rescue, strengthening the UK’s competition law framework, and empowering consumers.

The DTI summarises the main reforms in the Act as follows:

Insolvency Reforms

The Act reforms corporate insolvency law by restricting the use of administrative receivership and streamlining administration; making it quicker, more flexible, easier to access and, hopefully, fairer.

• The Act seeks to streamline the system of administration; removing the need for a court hearing in most cases, whilst retaining its collective nature and providing adequate safeguards for all stakeholders. The intention is to make administration more accessible, cheaper and less bureaucratic.
• The Act will restrict the use of administrative receivership and shifts the balance in favour of administration, which is a collective procedure and takes account of the interests of all creditors.
• The Act is intended to provide a modern bankruptcy regime that encourages entrepreneurship and provides a fresh start to those who have failed through no fault of their own. At the same time it provides effective protection against the small minority of bankrupts who abuse their creditors and the public.
• Those who have failed through no fault of their own and who co-operate with the Official Receiver will be discharged from their debts and released from restrictions after a maximum of 12 months.
• The Act will introduce a new Bankruptcy Restrictions Order regime, where the minority of bankrupts who have abused their creditors and the public will face restrictions from between 2 and 15 years.
• The Act makes mechanisms to remove many of the irrelevant and outdated restrictions that currently apply to bankrupts, which will help reduce the stigma of bankruptcy.
• The Act will limit the period in which a trustee may deal with an interest in a bankrupt’s (or former bankrupt’s) home to three years in most cases.
• The Act will abolish the Crown’s preferential right to recover unpaid taxes ahead of other creditors. This is intended to benefit unsecured creditors, including many small firms.

Competition Measures

• Taking politics out of competition decisions.
• More transparent and accountable decision-making by the competition authorities.
• Criminal sanctions with a maximum penalty of five years in prison to deter those individuals who dishonestly operate hardcore cartels.
• Greater opportunities for victims of anti-competitive behaviour to gain redress.

Consumer Protection Measures

• Extending the Stop Now Orders regime to protect consumers from traders who do not meet their legal obligations.
• Empowering consumer bodies to make ‘super-complaints’ to the OFT.

For more information please contact Peter Hawkes, Senior Partner & Head of Dispute Resolution.

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