delete The Insolvency Act 1986 (Prescribed Part) Order 2003
The Insolvency Act 1986 (Prescribed Part) Order 2003 implements section 176A of the Insolvency Act 1986, requiring that a portion of a company's net property (the 'prescribed part') be set aside for unsecured creditors in insolvency proceedings. It sets the minimum threshold at £10,000, with calculation of 50% of the first £10,000 plus 20% of amounts exceeding £10,000, capped at £600,000.
This regulation imposes a statutory redistribution of insolvency proceeds that overrides contractual arrangements between private parties. The prescribed part acts as a hidden levy on secured credit, increasing borrowing costs and distorting capital allocation. The specific percentages (50%, 20%) and thresholds (£10,000, £600,000) are arbitrary figures that lack economic justification. Secured creditors—who price their risk accordingly—are effectively subsidising unsecured creditors through this mandatory diversion, which may reduce the availability of secured credit and harm economic growth. In a free market, parties should be able to contract regarding priority of claims without government-mandated interference that creates winners and losers before any insolvency occurs.