Companies Act 1985

425 Power of company to compromise with creditors and members. E+W+S

(1) Where a compromise or arrangement is proposed between a company and its creditors, or any class of them, or between the company and its members, or any class of them, the court may on the application of the company or any creditor or member of it or, in the case of a company being wound up [F1 or an administration order being in force in relation to a company, of the liquidator or administrator], order a meeting of the creditors or class of creditors, or of the members of the company or class of members (as the case may be), to be summoned in such manner as the court directs.

(2) If a majority in number representing three-fourths in value of the creditors or class of creditors or members or class of members (as the case may be), present and voting either in person or by proxy at the meeting, agree to any compromise or arrangement, the compromise or arrangement, if sanctioned by the court, is binding on all creditors or the class of creditors or on the members or class of members (as the case may be), and also on the company or, in the case of a company in the course of being wound up, on the liquidator and contributories of the company.

(3) The court’s order under subsection (2) has no effect until an office copy of it has been delivered to the registrar of companies for registration; and a copy of every such order shall be annexed to every copy of the company’s memorandum issued after the order has been made or, in the case of a company not having a memorandum, of every copy so issued of the instrument constituting the company or defining its constitution.

(4) If a company makes default in complying with subsection (3), the company and every officer of it who is in default is liable to a fine.

(5) An order under subsection (1) pronounced in Scotland by the judge acting as vacation judge [F2 in pursuance of section 4 of the M1 Administration of Justice (Scotland) Act 1933] is not subject to review, reduction, suspension or stay of execution.

(6) In this section and the next—

(a) “company” means any company liable to be wound up under this Act, and

(b) “arrangement” includes a reorganisation of the company’s share capital by the consolidation of shares of different classes or by the division of shares into shares of different classes, or by both of those methods.

Textual Amendments

F1 Words substituted by Insolvency Act 1985 (c. 65, SIF 27), s. 109, Sch. 6 para. 11

F2 Words repealed (S.) by Court of Session Act 1988 (c. 36, SIF 36:1), s. 52(2), Sch. 2 Pts. I, III

Modifications etc. (not altering text)

C1 Ss. 425-427 applied (with modifications) (1.12.2001) by S.I. 2001/1228, regs. 1(2)(3), 70, Sch. 6 paras. 5, 6; S.I. 2001/3538, art. 2(1)

C2 Ss. 425-427 restricted (1.12.2001) by S.I. 2001/3639, art. 3(3)(a) (with art. 2)

C3 S. 425 restricted (S.) (1.11.2001) by 2001 asp 10, s. 63, Sch. 7 para. 10(2); S.S.I. 2001/336, art. 2(1)(3), Sch. Pt. II (subject to transitional provisions in art. 3)

C4 S. 425 applied (with modifications) (6.4.2001) by S.I. 2001/1090, reg. 4, Sch. 2 Pt. I

C5 Ss. 425-427 modified (1.12.2001) by 2000 c. 8, s. 105(6); S.I. 2001/3538, art. 2(1)

C6 S. 425 amended (1.12.2001) by 2000 c. 8, s. 362(6); S.I. 2001/3538, art. 2(1)

S. 425 amended (1.12.2001) by 2000 c. 8, s. 365(7); S.I. 2001/3538, art. 2(1)

S. 425 amended (1.12.2001) by 2000 c. 8, s. 371(5); S.I. 2001/3538, art. 2(1)

C7 S. 425 applied (with modifications) (6.1.1997) by S.I. 1996/2827, reg. 64, Sch. 7 paras. 5, 6(1)-(3)

C8 S. 425: power to apply (with modifications) conferred (15.9.2003) by Enterprise Act 2002 (c. 40), ss. 255(2)(c), 279; S.I. 2003/2093, art. 2(1), Sch. 1 (subject to transitional provisions in arts. 3-8 (as amended by S.I. 2003/2332, S.I. 2003/3340))

C9 S. 425(2) restricted (20.4.2003) by The Insurers (Reorganisation and Winding Up) Regulations 2003 (S.I. 2003/1102), reg. 5(2) (with reg. 3)

C10 S. 425(6)(a) amended (E.W.) (1.12.1991) by Water Consolidation (Consequential Provisions) Act 1991 (c. 60, SIF 130), ss. 2(1), 4(2), Sch. 1 para. 40(1)

C11 S. 425(6)(a) modified (20.4.2003) by The Insurers (Reorganisation and Winding Up) Regulations 2003 (S.I. 2003/1102), reg. 5(1) (with reg. 3)

Marginal Citations

M1 1933 c. 41.