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Company Director Stress 7

The Prescribed Part Order.

" Every debt is ultimately paid, if not by the debtor, then eventually by the creditor." - James Grant


What is The Prescribed Part Order?

The company requirements of the Enterprise Act 2002 came into force on September 15th, 2003. The ranking as to how creditors are paid, changed. The prescribed part order impacted on what monies became available?   As a company, however,  therefore payment made at the end of an insolvency process.

Insolvency Act 1986 (Prescribed Part) Order 2003 – Statutory Instrument 2003/2097

The “crown” in the UK, ceased as preferential creditors. Meaning, the VAT and PAYE liabilities ranked as unsecured in an insolvency effective September 15th 2003. Doing this was to give up the crown right of preferential ranking in an insolvency process. With the introduction of the Prescribed Part Order. Unsecured creditors have a fairer chance of receiving a distribution.

However, had the government at the time do nothing, other than abolishing “crown preference”. Then the company bankers if holding a debenture (ranking next in order of repayment) would absorb the distribution from the insolvency.

The legislature had to “prescribe a part” of the money, so the banks did not absorb the cash. So the changes protected the fund available to creditors by the Prescribed Part Order, therefore a dividend may exist for distribution to unsecured creditors.


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