The prescribed part under section 176A of the Insolvency Act 1986
The prescribed part under section 176A of the Insolvency Act 1986

The following Restructuring & Insolvency practice note provides comprehensive and up to date legal information covering:

  • The prescribed part under section 176A of the Insolvency Act 1986
  • What is the prescribed part?
  • Background to the prescribed part
  • Who can participate in the prescribed part?
  • Calculating the value of the prescribed part
  • Exceptions to the prescribed part

What is the prescribed part?

Background to the prescribed part

When an insolvency office-holder is appointed, their primary role is to collect in and realise the company’s assets in order to distribute them to creditors and shareholders according to the statutory order of payments, also known as the waterfall of payments—see: Order of payments—overview.

The prescribed part was introduced by the Enterprise Act 2002 as part of a package of major reforms to the corporate insolvency regime. It created a new section 176A of the Insolvency Act 1986 (IA 1986). IA 1986, s 176A applies where a company has granted a floating charge on or after 15 September 2003 and gone into one of the following insolvency procedures:

  1. liquidation (or provisional liquidation)

  2. administration

  3. administrative receivership

In those circumstances, the office-holder is required to set aside a portion (a ‘prescribed part’) of the company’s ‘net property’ to be available in satisfaction of unsecured debts. For these purposes, a company’s net property is that which is available for satisfaction of claims of holders of floating charges (as created). Put another way, the prescribed part increases the likelihood that unsecured creditors will receive a return in the insolvency by carving out a portion of floating charge realisations and setting them aside for unsecured creditors.

Since 26 May 2015 and the coming into force

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