The Compendium

Prescribed Part

Under section 176A of the Insolvency Act 1986 and the Insolvency Act 1986 (Prescribed Part) Order 2003, the prescribed part is the part of the proceeds from realising the assets covered by a floating charge (having been collected by a Liquidator as a fund available for the creditors), that must be set aside and made available to satisfy unsecured debts.

Effectively, having realised the asset subject to a floating charge the Liquidator, rather than pay the floating chargeholder in full, must deduct an amount and keep it aside in order to ensure the unsecured creditors get something from the Liquidation (even if it is only a few pence in the pound).

The prescribed part is calculated as a percentage of the value of the company’s property which is subject to a floating charge, namely:

50% of the first £10,000 of net floating charge realisations, plus 20% of anything thereafter … … subject to a maximum prescribed part of £800,000 where the first ranking floating charge was created on or after 6 April 2020 (£600,000 if created before then).

The rule on the prescribed part can be disapplied if:

• The company’s net property is less than £10,000;
• The Insolvency Practitioner thinks the cost of making a distribution would be disproportionate to the benefits;
• The net property exceeds the minimum;
• A court orders the disapplication of the rule.

[See ‘Insolvency Act’, ‘Floating Charge’, ‘Floating Chargeholder’ and ‘Insolvency Practitioner’.]

Prescribed Persons

Parts of insolvency legislation (statute) set out a list of ‘prescribed persons’ to who information must be shared or given.