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Enterprise Act changes to be introduced in June

From 20th June, UK competition laws will change when provisions of last year's Enterprise Act come into force. The Act strengthens the competition law framework, transforming the approach to bankruptcy and corporate rescue, and empowering consumers.24 Apr 2003

The Enterprise Act was passed on 7th November last year. Certain parts of it came into force on 1st April 2003 and, on Tuesday, the Department of Trade fixed the date for bringing additional measures into force. However, this second wave will not include the Act's important insolvency provisions.

The measures currently in force change the structure of the Office of Fair Trading and create the new Competition Appeal Tribunal and its supporting Competition Service.

The measures coming into force on 20th June are:

  • Extending the Stop Now Order regime to protect consumers from traders who do not meet their legal obligations. The new enforcement regime will apply to infringements of a wide range of legislation protecting the interests of consumers, such as failing to carry out a service (e.g. building work or home maintenance) to a reasonable standard. This will also ensure that honest traders, especially small businesses, do not face unfair competition from those who engage in unlawful conduct; and
  • Consumer bodies will be able to make 'super-complaints' to the OFT. The OFT will be required to respond within 90 days. This will significantly strengthen the voice of consumers on competition matters.
  • The Act's corporate and crown preference insolvency provisions are due to come into force in the summer – although the exact date has not been fixed. Individual and financial regime provisions will come into force at the start of the 2004 financial year.

These insolvency provisions will:

  • Abolish the Crown's preferential right to recover unpaid taxes ahead of other creditors - this will bring real benefits to unsecured creditors, including many small firms.
  • Reform corporate insolvency law by restricting the use of administrative receivership and streamlining administration, making it quicker, more flexible, easier to access and fairer. The Act streamlines 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. This aims to make administration more accessible, cheaper and less bureaucratic. The Act restricts 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.
  • 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 they provide 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.
  • Introduces 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.
  • Removes many of the irrelevant and outdated restrictions that currently apply to bankrupts, which the Government hops will reduce the stigma of bankruptcy.
  • Limits 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.
  • Modernise the financial regime of the Insolvency Service. Reforms to the Insolvency Services Account will mean that creditors, including many small firms, receive the maximum possible investment return. Simplifying the fee structure will bring increased transparency and simplicity.

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