Rise in FRC investigations

Earlier in April last year, we wrote an article on the insolvency exemption to the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO). Insolvency practitioners will be disappointed to hear that it has now been confirmed that the exemption will be lifted later this year.  

The Court of Appeal has recently considered whether an LPA Receiver owes a duty of care to a bankrupt mortgagor in connection with the way the Receiver deals with the mortgaged property. In a decision which will be welcomed by Receivers and their insurers, the court decided that a Receiver owes no such duties.

The facts

An update on recent changes

1 October 2015 – A day of changes to insolvency law

The start of October 2015 brought about important changes in insolvency law, affecting both creditors and debtors alike. The most notable changes are detailed below.

Harmonising office holder claims in administration  and  liquidation

In September 2013 we reported on the Enterprise and Regulatory Reform Act 2013 which provided the Government with the power to extend the law regarding the supply of essential services to insolvent customers. These reforms were anticipated to come into force in April 2014. It has now been announced that the changes will come into force on 1 October 2015.

Extension of essential supplies

In Winnington Networks Communications Ltd v HMRC^[1], the Chancery Division Companies Court (Nicholas Le Poidevin QC) refused the taxpayer company's application to have HMRC's winding-up petitions dismissed, as it had failed to provide evidence that it had a real prospect of successfully disputing the debt claimed by HMRC.

Background

In Smailes and another v McNally and another^[i]the High Court refused the claimant's application for relief from sanctions, finding the claimant's failure in respect of its disclosure obligations under the relevant provisions of the Civil Procedure Rules (CPR 31) amounted to a significant and serious breach of an "unless order".

On 22 April 2015 the Supreme Court handed down its judgment in the case of Jetivia SA and another v Bilta (UK) Ltd (in liquidation) and others [2015] UKSC 23, which was heard in October last year.  In short it decided that: 1) defendant directors cannot raise illegality as a defence to a claim by a company where the directors themselves acted wrongfully; and 2) a claim in fraudulent trading under Section 213 of the Insolvency Act 1986 (Section 213)has extra-territorial effect.

Background

Removal of requirement for sanction

Previously under section 165 IA 86, liquidators in a voluntary winding up would have to seek sanction of the company (in members’ voluntary liquidation) or of the court or liquidation committee (in creditors’ voluntary liquidation) in order to exercise their powers to pay debts, compromise claims etc. SBEEA removes this requirement so that liquidators can exercise those powers freely. This will aid expeditious winding up of companies. Equivalent provisions have also been put into place for trustees in bankruptcy.

In the recent case of HMRC v Munir & Others[1], HMRC successfully applied to the Court for committal of three company officers for contempt of court where an order appointing a provisional liquidator was knowingly breached.

 Background