In the second of a two-part series, Registrar Stephen Baister completes his examination of insolvency law changes

Both court and out-of-court administrations under the provisions of the Enterprise Act 2002 (EA), coming into force on 15 September 2003, create a statutory moratorium.

During this, no resolution to wind up the company may be passed; generally no winding-up order may be made; no landlord may forfeit except with the administrator's consent or the court's permission; and no legal process (including legal proceedings, execution and distress) may be instituted or continued against the company or its property except with such consent or permission.

An application for an administration order creates an interim moratorium.

A major change to administrative receivership is brought about by the EA.

The holder of a qualifying floating charge is prohibited from appointing an administrative receiver after 15 September 2003 (section 250 EA, SI 2003/2095).

In future, the holder of such a charge will be compelled to use the new administration procedure.

This does not affect the right to appoint a receiver under the Law of Property Act 1925 or to apply to the court for the appointment of a receiver under part 69 of the Civil Procedure Rules 1998.

A large part of the EA will come into force on 1 April 2004.

There are radical reforms in respect of the discharge of bankrupts, with generally automatic discharge for the majority of bankrupts after one year or earlier, if the official receiver files notice that the affairs of the bankrupt do not require investigation or that such investigation has been concluded.

The official receiver may still apply to suspend discharge if a bankrupt fails to comply with his obligations.

As a balancing safeguard, the EA introduces bankruptcy restriction orders.

The application for an order may be made by the secretary of state for trade and industry or the official receiver and must be supported by a report setting out the conduct relied on.

The effect of an order is to make it an offence for a person to act as a director of a company or directly or indirectly to be concerned in the promotion, formation or management of a company without the permission of the court, to act as a receiver or manager of company property or to act as an insolvency practitioner.

A bankrupt may also enter into an undertaking which has the same effect as an order.

Important restrictions are introduced on the right of a trustee to realise the home of the bankrupt.

Under the new provision, where the bankrupt had an interest in a dwelling-house which was the sole or principal residence of the bankrupt, the bankrupt's spouse or the former spouse at the date of the bankruptcy order, the interest ceases to be comprised in the bankrupt's estate at the end of three years, beginning with the date of the bankruptcy, and revests automatically in the bankrupt unless the trustee makes an application within the three-year period or takes other steps set out in the section.

The three-year period may be extended.

The new Act also aims to protect low-value property of the bankrupt with provision that the court must dismiss an application made in respect of a "low-value home".

What will constitute a low-value home is not yet clear.

Significant changes to income payment orders are made.

The application for an order must be made before discharge and the court may allow the order to continue after discharge but not for longer than three years.

The bankrupt may enter into an income payments agreement with the official receiver or trustee.

Registrar Stephen Baister sits at the Royal Courts of Justice