Debt Arrangement Orders (DAOs)

On the administration of such orders ,the committee was split between the Registrar’s ability to contracting the job out to a firm, or whether the court should be empowered to appoint an administrating firm. The committee agreed that the Registrar should have the power to appoint a private administrator.

A number of suggestions were discussed about how to best improve the language of the application form of a DAO. It was agreed that the extension of 5 years should be after review. Only debts due and payable at the date of the DAO would be included in the order.

The committee seemed to be in agreement that a debtor’s failure to comply with a DAO would be considered as a contempt of court. While the committee was against imprisonment for small debts, they acknowledged that it might work in other cases. There would be three options for the Registrar: either revoke the DAO, recommend that the debtor be declared bankrupt or ask the judge to review the case for contempt of court.

Finally, a point was made about distinguishing contributions from income from the selling up or realisable value of assets. Contributions from income surpluses should be considered at the early stages of insolvency as a matter of principle.

Fraudulent preferences

The term ‘fraudulent’ should be changed to ‘voidable’ or ‘wrongful’. The committee then questioned whether it envisaged a law where liquidators or trustees could set aside transactions that were not bona fide or full value, in which case fraudulent preferences would not be a separate issue. The committee said it wished to define those payments prior to insolvency.

The committee discussed in-depth the meaning of intent, pressure and the period of absolute avoidance. The formula advanced was as follows: a payment within 6 months of the commencement of insolvency should be void unless there is a benefit for creditors.

 

Meeting36 - 14th December 1979