It’s autumn and time to put that box-set viewing on pause and perhaps instead review the likely direction of travel of the “zombie” army of distressed businesses. How do you avoid contagion?

Unless you hibernated during the various lockdowns you will not have failed to notice that the impact of Brexit, the Covid-19 pandemic, and lockdown measures took their toll on spending, incomes and jobs, tipping the UK economy into recession after negative growth in the first two quarters of 2020.

Shareholders in FTSE 250 company TI Fluid Systems yesterday voted down the company’s proposal to pay a £27 million dividend. In a highly unusual move, 57 per cent of shareholders in the motor part manufacturer used their votes to block the dividend payment which had been recommended by the board just four days earlier. It followed critical media coverage of the proposal, which centred on the fact that the company was making the payment while furloughing staff and cutting workers’ pay and would have resulted in a payment of almost £15 million to US private equity firm Bain Capital.

On 28 March 2020, business secretary Alok Sharma announced plans to reform insolvency law to add new restructuring tools, including:

The Chancellor has committed to doing “whatever it takes” to save businesses and workers and, as part of a raft of measures, has pledged to pay 80% of staff kept on by employers.

‘Visit England’ promotes tourism to England and Wales by reference to the beautiful scenery, world-class museums and abundance of culture on offer. Following the recent judgment of JSC Bank of Moscow v Kekhman & Ors [2015] EWHC 396 (Ch) (Kekhman), it should consider adding an advantageous personal insolvency regime to this list. 

Bankruptcy remains the most well-known, and perhaps most feared, of the personal insolvency processes. Since the current threshold was introduced 30 years ago, it has been used by creditors owed as little as £750 as a dire threat to extract payment from reluctant debtors. However, the Government has stepped in and is squeezing the bankruptcy process, seeking to ensure bankruptcy is reserved for the most appropriate cases and encouraging alternative regimes for the management of small debts.

In a challenging economy bankruptcy increasingly stands accused of constituting a mechanism for debtors to escape their responsibilities at their creditors' expense. It understandably remains a live debate as to whether a bankrupt should be afforded the means of a protected pot of money for his future use while his creditors are left unrecompensed for their loss. The debate is not new, but the balance has perhaps shifted in a climate where creditor losses are felt particularly keenly.

Income payments orders (IPOs) are an essential tool for the trustee in bankruptcy in realising a bankrupt’s assets. Until recently, it had been assumed that, absent circumstances akin to fraud, a trustee in bankruptcy could not touch a bankrupt’s undrawn pension. However, in Raithatha v Williamson, the court decided that an income payments order may be made where the bankrupt has an entitlement to elect to draw a pension but has not exercised it at the time of the application. 

Drawn versus undrawn

Costs are the price that creditors pay for an insolvency practitioner’s (“IP”) expertise and time in dealing with a trading bankrupt or insolvent business. However, where the assets are insufficient to meet the existing debts, the imposition of a practitioner’s fees and expenses being paid out in priority can send some “over the edge” and all practitioners have the scars to prove it. This article explores the developing general principles and major pitfalls and how to avoid them.

The Court of Appeal’s ruling in Neumans LLP v Andrew Andronikou & Ors [2013] EWCA Civ 916 has provided some useful guidance to insolvency practitioners on the courts’ approach to administration and liquidation expenses.

Pre-match warm up