Business Debt Arrangement Scheme (BDAS) (Scotland)

This fact sheet tells you how a Business Debt Arrangement Scheme (BDAS) can be used to deal with your business debts. It is a legal scheme that can allow your business time to pay off its debts and gives protection from creditors' action. This fact sheet explains the main things you need to know to help you decide if a Business Debt Arrangement Scheme might be a suitable option for you.

Use this fact sheet to:

• find out what the Business Debt Arrangement Scheme is and how it can help to deal with your debts;
• find out how to apply for the Business Debt Arrangement Scheme;
• understand how details of the Business Debt Arrangement Scheme will be recorded; and
• understand how to make a complaint.

What is Business DAS?

The DAS Administrator, who runs BDAS, has published a guide, Debtor Information Booklet - Business DAS, which you can download and print from the Accountant in Bankruptcy (AiB) website www.aib.gov.uk. See Useful contacts for details

The Debt Arrangement Scheme (DAS) is a legal scheme run by the Accountant in Bankruptcy (AiB) for the Scottish Government. Business DAS (BDAS) is an extension of the scheme. It will give your business up to five years to pay off its debts through a debt payment programme. All your business's debts must be included.

Whilst a debt payment programme is in place through BDAS, all interest, fees and charges on your business's debts will be frozen from the date that you apply. Creditors should not contact you during your debt payment programme to ask for payment.

As long as you complete the debt payment programme, the frozen interest, fees and charges will be written off. BDAS can also give you protection from creditors applying to make your business bankrupt, or using court action against you to enforce your debts. Enforcing a debt through the courts is often known as ‘diligence’.

Even if some of your creditors have started to use court action against you, in most cases joining BDAS will stop this action from going any further

Companies may say that they can help with a BDAS application, but they may not be approved money advisers or insolvency practitioners. For a directory of approved money advisers check either the AiB website or Scotland's Financial Health Service's website. See Useful contacts for details.

Advantages of BDAS

• Your business can keep trading.
• You get up to five years to repay your debts.
• BDAS is flexible within its five-year time limit. If your circumstances change you may be able to vary your debt payment programme to make it more affordable, take a payment break or even pay it off more quickly when your business's situation improves.
• You will only have to make one regular monthly payment. This is paid to an approved payments distributor who will send the money to your creditors for you.
• Joining BDAS will protect you from most creditors using court action to recover their debt.
• Interest, fees and charges are frozen from the date you apply for a BDAS debt payment programme and are written off when it is completed.

Types of business that can join BDAS

The following types of business can apply for BDAS:

• a partnership;
• a limited partnership within the meaning of the Limited Partnerships Act 1907;
• a corporate body other than a company registered under the Companies Act 2006,
• a trust; and
• an unincorporated body of persons (for example, a football club).

The Business DAS Register

When a person gives their consent in a business to allow an application to BDAS, their personal details are placed on the DAS Register at the same time as the details of the business are placed on the Business DAS Register. Their bank may restrict or suspend their personal account and they may need to apply for a basic bank account.

The Business DAS Register gives information about businesses which are applying for, or which have already got, a Business DAS debt payment programme. This is a public access register which anyone can look at free of charge. There is a link to the DAS Register on the AiB website. From there you can reach the Business DAS Register. See** Useful contacts **for details.

Creditors and credit reference agencies can check the Business DAS Register and may use this information to update your business's credit reference file to state that it has a debt payment programme. The Business DAS Register will also state whether there has been any variation in the conditions of your business's debt payment programme. It will include details of your business's name and address. It will also include the name, address and date of birth of each person who has given consent for the BDAS application.

Personal and business details

Anyone can search the Business DAS Register for information about businesses and the DAS Register for information about individuals from the AiB website.

When a person a business gives their consent to allow an application to BDAS, their personal details are placed on the DAS Register at the same time as the details of the business are placed on the Business DAS Register. Their bank may restrict or suspend their personal account and they may need to apply for a basic bank account.

BDAS application rules

Your business can apply to join BDAS as long as:

• it has one or more debts;
• it has a place of business in Scotland, or operates as a business that is formed under Scottish law;
• it has enough money left over after taking account of essential business expenditure to repay its debts within five years;
• it is a trading business, or if not trading operating in the purpose for which it was formed (for example, a charity);
• it has declared all its assets to the insolvency practitioner (see the later section Assets);
• it has obtained the necessary consent (see the later section Consent);
• it does not have a protected trust deed;
• it has received advice from an approved money adviser who must be an insolvency practitioner; and
• has been given a declaration of viability by the insolvency practitioner.

Declaration of viability

When your business applies for a BDAS debt payment programme, your insolvency practitioner must provide a declaration that the business:

• has a reasonable prospect of being able to complete the debt payment programme;
• can make the payments within five years; and
• is trading, or is operating in the purpose for which it was formed.

Assets

If both an individual and a business is liable for a particular debt, the debt must be disclosed in an application by that individual for a DAS debt payment programme. It must also be noted in the application made by the business for a Business DAS debt payment programme. However, the debt can only be included in one of the debt payment programmes, not both.

You must tell the insolvency practitioner about any business assets that could be sold and put into the BDAS debt payment programme when your business makes the application. Each year you will have to update the insolvency practitioner about your assets when they carry out their annual review.

You cannot sell any 'non-trading' assets without permission from the insolvency practitioner. Non-trading assets can include, for example: a closed part of the business which can be sold, a patent or a property. Non-trading assets do not include:

• current or circulating assets (for example, stock in trade, inventory);
• if you are trading, any article that your business acquires to be sold by the business, or as a material for a process of manufacturing for sale by the business;
• any article of a perishable nature, or which is likely to deteriorate substantially and rapidly in condition or value;
• any home or mobile home, unless the home or mobile home is used for the business or operations of the business;
• most articles within a home or mobile home. But they do include: implements, tools of trade, books or other equipment reasonably required by the business or any employee of the business to carry out the business.

You will need to get the insolvency practitioner's agreement about the amount of money expected for creditors before any sale goes ahead.

Your insolvency practitioner must review your business's situation at least once every 12 months. They will want to know if the business has had any major changes which affect its nature or its trading prospects over that period. They also have to send a declaration of viability to the DAS Administrator. If they are not able to provide the declaration, they must apply to cancel ('revoke') the debt payment programme. See the later section Missed payments for more information about the cancellation of a debt payment programme.

Consent

The people who have to give consent differs for each type of business.

• Partnership: each partner must consent.
• Limited partnership: every general partner (and any limited partner who at any time has taken part in the management of the firm) must consent.
• Trust: the majority of the trustees must consent.
• Corporate body (other than a company registered under the Companies Act 2006) or an unincorporated body: a person authorised to act on behalf of the body must consent.

Choosing the best option

If you think that a BDAS debt payment programme might be the best option to help your business with its debts, you need to get help from an approved money adviser who must be an insolvency practitioner.

The first thing that your insolvency practitioner will do is to look at all your business's circumstances and help you to decide on the best debt option for you. They may also want to discuss a debt management plan, a trust deed or bankruptcy.

Fees

Insolvency practitioners will usually charge a fee for submitting your BDAS application. They must tell you about the fees they will charge. You can check if there is a fee on the approved money adviser directory. See the earlier section What is Business DAS? for information about how to do this. You will have to pay this fee because it cannot be included in the debt payment programme.

My creditors are threatening enforcement action

It can take a little bit of time for your approved money adviser to get all the information that they need to be ready to apply for your debt payment programme.

In the meantime, either the business or your insolvency practitioner can contact the DAS Administrator to confirm that the business is intending to apply for a BDAS debt payment programme. This is called a ‘moratorium’. Your moratorium will then be placed on the BDAS Register, along with the details of the business. Once on the DAS Register, you will be protected against creditor action for six months.

However, some kinds of creditor action through the court - called 'diligence' - are still possible. A creditor who:

• has a decree of furthcoming could implement it; and
• has attached an item, could sell it by auction if they have sent the required notice.

Once your debt payment plan is approved, these kinds of action must stop.

Your business cannot make more than one moratorium within a 12 month period, whether this is for a BDAS debt payment programme, a trust deed or bankruptcy.

Making the application

Once you have found an insolvency practitioner and decided that a BDAS debt payment programme is your best option, your insolvency practitioner will take you through a series of steps to make your business's application.

They will check:

• your business income;
• your essential business expenditure;
• the money remaining after essential business expenditure has been paid;
• your business debts; and
• your business assets.

In doing this your insolvency practitioner will:

• ask for proof of the business's income and expenditure;
• gather information about all of your business debts, checking the amounts your business owes to its creditors; and
• gather information about all of your business assets.

If your business is a charity, the application must also include proof that your business has told the Office of the Scottish Charity Regulator about your application. See Useful contacts at the end of this fact sheet for how to contact them.

The insolvency practitioner will start the application process by contacting your business's creditors with the proposal, asking them to agree to the debt payment programme. The proposal will set out:

• the total amount owed by the business;
• the agreed amount for each repayment instalment;
• when the proposed payments will be made;
• the proposed length of the debt payment programme; and
• a declaration of viability.

Creditors have 21 days to respond to the proposal. They can:

• agree to the proposal;
• not reply - if so, they are treated as if they have agreed to the proposal; or
• not agree to the proposal.

The insolvency practitioner will complete the application process by contacting the DAS Administrator with the proposal, including the declaration of viability.

After the application is made

Once the DAS Administrator receives the application for a debt payment programme, your business's details are entered on the Business DAS Register, if they have not already been entered because of an intimation. Once the business's details are entered, it is protected against any creditor action to enforce their debt for six weeks, or longer if needed. This protection will only stop if you withdraw your business's application, or if it is rejected by the DAS Administrator.

If all the creditors have agreed to the proposal, the DAS Administrator will approve it automatically, as long as the debt payment programme does not last longer than five years. Any creditors that have not replied within the time limit are treated as if they have agreed.

What if a creditor objects?

If one or more of your creditors do not agree with the debt payment programme, they will tell the DAS Administrator.

Even if a creditor objects to your business's proposal, the DAS Administrator can still approve your debt payment programme after using the ‘fair and reasonable’ test. The DAS Administrator will decide whether to approve or to reject your business's application by taking into account a range of information for this test, including:

• the total amount of your business debt;
• how long the proposed debt payment programme will take;
• how you are proposing to pay and how often you are proposing to make payments;
• how many other creditors have objected;
• any comments that either you or your insolvency practitioner have made;
• any previous debt payment proposals that you may have made; and
• anything else that they think they should take into account.

If you want to withdraw your business's application for a BDAS debt payment programme, you must tell the DAS Administrator in writing before they have rejected or approved your application. You can write yourself, or you can ask your insolvency practitioner to do it for you.

When an application is approved

If your debt payment programme is approved, the DAS Administrator will inform both you and your insolvency practitioner in writing. This means you will be able to pay your debts through a single, regular payment as set out in your debt payment programme. Your approved debt payment programme is effective from midnight on the day before the date that the DAS Administrator approves it on the BDAS Register. For example, a debt payment programme approved on 1 February will be effective from midnight on 31 January.

• The DAS Administrator will tell your payments distributor about your debt payment programme so that they can arrange the start of your payments. You make your regular payment to this independent company and they will send the money on to your creditors for you.
• Your business's first payment must be made within 42 days of the date of the approval by the DAS Administrator.
• Your payments distributor will contact your business's creditors and arrange to pay regular amounts to them for the period of time agreed in the debt payment programme.

The business must tell their insolvency practitioner, or the DAS Administrator, about any significant changes that might affect the nature, the purpose, the financial situation or the trading position of the business within 14 days.

Will I be charged a fee by the payments distributor?

The payments distributor cannot charge you a fee for distributing your repayments amongst your creditors. The DAS rules allow them to charge a small fee to your creditors for the service they provide. This does not affect the payments that you make in your debt payment programme

When a proposal is rejected

If your proposal is rejected, the DAS Administrator will inform you in writing, explaining why it was not approved. Interest, fees and charges will be restored to your debts from the date of the DAS Administrator's decision as if you had not made your application. Contact your insolvency practitioner to talk about your options. You have an opportunity at this point to submit a revised proposal. Creditors can take further action 14 days after the date that the rejection was noted on the Business DAS Register.

Review

If you think that the DAS Administrator has not applied the law correctly, you can ask them to review their decision. Your insolvency practitioner will be able to help you apply. You have 14 days from the date that the rejection decision was placed on the Business DAS Register to write to the DAS Administrator to ask for a review. They will write back and confirm that your request has been received. A creditor can also ask for a review. The DAS Administrator may decide to:

• keep the same decision as before;
• alter the decision; or
• cancel ('revoke') the decision and replace it with a new one. They will write to tell you the result of the review within 28 days.

Appeal to the sheriff court

If you think that the DAS Administrator has not applied the law correctly, either in their original decision or in the review, you can appeal to the sheriff court. Your insolvency practitioner will be able to help you to do this. You have 14 days from the date of the DAS Administrator's review decision to register your appeal at the sheriff court. A creditor can also appeal. The sheriff's decision is final.

Changing the payments

If you need to change the payments on your debt payment programme because the financial situation of the business has changed, you should apply to vary the debt payment programme. Your insolvency practitioner will help you to do this. A variation of the payments must be able to complete the repayment of the debts within five years of the date on which the debt payment programme was approved.

You need to keep making the scheduled payments while the variation application is being dealt with so that the debt payment programme is not cancelled ('revoked').

Applying for a variation

The result of a variation could be that:

• the amount of your regular payment goes down or up;
• the timing of payments may change;
• a payment break of up to six months is agreed;
• the length of time over which payments are made may change; or
• a new condition, such as the sale of a new asset, is added to the debt payment programme.

Your insolvency practitioner will contact the creditors and try to get their agreement to the variation before sending the application to the DAS Administrator. They will send a declaration of viability with the application. At the same time they will tell the creditors and the payment distributor that the application has been made. Creditors have 14 days to respond.

The DAS Administrator will usually only agree to a variation in one of the following situations.

• There is an agreement between the business and each creditor that the debt payment programme should be varied.
• The business has experienced an important change in its financial situation, such as its income going up or down by a large amount.
• Both the business and a creditor agree that there is no longer a debt to be repaid.
• A debt was missed out by mistake, or forgotten about, when the debt payment programme was made.
• A debt that the business could not put a figure on when it applied for the debt payment programme has become a fixed amount that it now owes.
• The business needs credit to pay for an essential business expense.
• The business would benefit from a payment break, can continue to trade and can repay all its debt within the five-year period.

The DAS Administrator's decision

If all the creditors agree to the application, the DAS Administrator will approve the variation. If there are any objections, the DAS Administrator will apply the fair and reasonable test to decide whether or not to approve the variation. The DAS Administrator will take into account your views, the creditor’s views and your insolvency practitioner’s views, as well as any other relevant factors. They will either approve the variation or reject it and write to all parties informing them of the reasons for their decision. If the variation is approved, your business's insolvency practitioner informs the payments distributor of the decision so that they can alter the programmed payments. If the variation is rejected, payments continue as they were set up in the debt payment programme.

If you do not accept the DAS Administrator's decision, because you think that they have not applied the law correctly, you can ask them to review their decision. See the earlier section Review.

If you think that the DAS Administrator has not applied the law correctly, either in their original decision or in the review, you can appeal to the sheriff court. See the earlier section Appeal to the sheriff court.

Missed payments

If you miss an instalment or underpay an instalment, the payments distributor will inform your business's insolvency practitioner and the DAS Administrator in writing, detailing the missed payment. Your business's insolvency practitioner will contact you to discuss what is the appropriate next step, depending on the circumstances.

If your business misses a payment, what follows depends on the reason why the payment was missed. If it was a one-off, for example over a holiday period, making up the missed payment may be all that is needed. But, if there has been a change in the regular income, it may be appropriate to apply for a variation in the debt payment programme. However, if your arrears add up to the value of the two monthly payments following the last payment you made, the DAS Administrator may cancel ('revoke') your debt payment programme. They can also cancel the debt payment programme if:

• the business makes itself bankrupt;
• the business gets a protected trust deed;
• the business does not keep to a condition which is included in the debt payment programme;
• the business made a false statement when applying for the debt payment programme, or when making an application for a variation;
• the business is dissolved;
• the business has asked for the debt payment programme to be revoked; or
• the business changes its nature, or purpose, in a major way.

A business might change its nature if the composition of a partnership alters, or if a trustee ends their involvement with a trust. A business might change its purpose if it decided to become a charity.

If your business's insolvency practitioner cannot provide a declaration of viability at the time of the annual review, they must ask the DAS Administrator to cancel the debt payment programme.

Cancellation

The DAS Administrator will contact the business and anyone requesting a cancellation, to tell them that they intend to cancel the debt payment programme. The business has four weeks to respond through the insolvency practitioner.

You must act quickly if you want to stop your debt payment programme from being revoked. Let the DAS Administrator know about your circumstances and why you want to keep your debt payment programme.

If the business does not respond and the debt payment programme is cancelled, creditors cannot take action against the business for 14 days after the date of the decision to cancel it.

When deciding whether or not to cancel the debt payment programme, the DAS Administrator will take into account the rules and also the circumstances around how the business has broken them. They will look at any other factors, including whether or not the debt payment programme is likely to be successful.

If your business's debt payment programme is cancelled, your business's creditors can take action against you 14 days after the date of the decision to cancel it. Also, creditors can ask your business to pay the interest and charges that would have been payable if it had not started the debt payment programme.

Further business credit

Trade credit needed by your business in the ordinary course of trading is allowed. But the business is not supposed to take out further credit whilst in a debt payment programme unless one of the following special circumstances applies.

• The DAS Administrator approves your credit and your debt payment programme is varied to help you repay the credit.
• The business needs credit for emergency repairs to a building, an asset which is not used in trading, or a vehicle which is only or mainly used to carry out the business.
• The credit was taken out before the business was approved for a debt payment programme and it was part of a cyclical loan agreement.

Your business must give the creditor written notice of the debt payment programme before the credit is given. You will be expected to pay the credit back at the agreed contractual rate. Your debt payment programme may be varied to take this into account. If the business gets credit without notifying the creditor that it has a BDAS debt payment programme, it could be grounds for the debt payment programme to be cancelled.

Impact on credit rating

Credit reference agencies check the Business DAS Register regularly and may update the business's credit file to reflect that information. This is likely to affect the business's ability to take out further credit. It may also affect the ability of anyone who provided consent for the business to apply for a debt payment programme to take out more credit themselves.

Completing the debt payment programme

The business has completed its debt payment programme when:

• it has paid all the payments; or
• it makes a lump-sum payment equal to all outstanding payments or
• all creditors in your business's debt payment programme agree in writing to complete it before the scheduled end.

The payments distributor will inform everyone that the debt has been repaid. The DAS Administrator will remove the business's details from the Business DAS Register. Once the debt payment programme has been completed, the business cannot be held liable for any further payments towards the debts, or any further penalties, interest or charges.

Making a complaint

If you are unhappy with the way in which your debt payment programme has been dealt with, you may have reasons for complaining about your insolvency practitioner or about the DAS Administrator.

A complaint about your insolvency practitioner

If you are unhappy with your insolvency practitioner, you should write to them stating the nature of your complaint. If you are not content with their response, you should pass your complaint to the Insolvency Service. GOV.UK has more information on how to do this and an online form. See Useful contacts for details.

The Insolvency Service will contact you to let you know whether or not your complaint can be referred to the Institute of Chartered Accountants of Scotland (ICAS). ICAS can only investigate insolvency-related complaints which are referred by the Insolvency Service. See Useful contacts for details.

A complaint about the DAS Administrator

If you feel that you have a complaint about the DAS Administrator, you should follow the AiB’s complaints procedure. See the Useful contacts section for details of how to contact them.

If you are still unhappy, you can complain to the Scottish Public Services Ombudsman. See the Useful contacts section for details of how to contact them.

Useful contacts

DAS Administrator Phone: 0300 200 2600 Email: aib@aib.gov.uk www.aib.gov.uk/debt-arrangement-scheme/

Insolvency Service Phone: 0300 678 0015 Email: ip.complaints@insolvency.gsi.gov.uk www.gov.uk

Institute of Chartered Accountants of Scotland (ICAS) Phone: 0131 347 0100 Email: complaints@icas.com www.icas.com

Scotland's Financial Health Service www.scotlandsfinancialhealthservice.gov.uk

Scottish Charity Regulator (OSCR) Phone: 0138 222 0446 www.oscr.org.uk

Scottish Public Services Ombudsman The Ombudsman has a freepost address: Freepost SPSO Phone: 0800 377 7330 www.spso.org.uk