This appeal to the Supreme Court of the United Kingdom arose out of the insolvency and administration of the Lehman Brothers Group of companies. Lehman Brothers International (Europe) (LBIE) was the principal European trading company in the group, and was authorised and regulated by the Financial Services Authority (FSA) prior to being put into administration in 2008. This appeal (one of many involving the group) related to the provisions of the Clients' Assets Sourcebook issued by the FSA (CASS) that govern the basis on which client money is required to be held by regulated ent
Recently a number of businesses that were acquired in the relatively heady pre-GFC days have needed to take action to restructure their equity and debt. Often the businesses have been carrying a significant debt burden from the acquisition. Compounding this, the value of the business may have been eroded to a level that is less than the value of the debt, possibly because of operating results having deteriorated and/or the valuation multiples attributed to the business having shortened.
A recent High Court decision by Justice Heath on the new section 30(2B) of the Receiverships Act 1993 (the Act) provides guidance as to how receivers should account for their remuneration and expenses when dealing with accounts receivable and inventory.
The key points are as follows:
Until recently, the PPSA did not give second and subsequent ranking secured creditors a statutory right to take possession of collateral in the event of default. The PPSA has recently been changed to allow all secured creditors to exercise this right. The recent case of Glenmorgan v New Zealand Bloodstock [2011] NZCA 672, however, confirms that all secured creditors can also rely on contractual rights to take possession of collateral. Secured creditors should ensure that their security documents clearly give them this right.
In a decision released in September 2011, the High Court ruled that a mortgagee cannot exercise its power of sale under the mortgage if the Family Court has subsequently made an interim occupation order under the Property (Relationships) Act. That ruling had significant consequences for mortgagees, and was appealed to the Court of Appeal.
In the recent decision in Taylor v Official Assignee, the Court of Appeal overturned the High Court's dismissal of Mrs Taylor's appeal against the Official Assignee's decisions to set aside dispositions by Mrs Taylor to her family trust prior to her bankruptcy.
Mr and Mrs Taylor settled the family trust in October 2000. The dispositions in question occurred between December 2000 and January 2007. Mrs Taylor was adjudicated bankrupt in November 2006.
In Fenland District Council v Sheppard and others, FDC had spent £72,000 making a derelict property safe, which by the hearing date was worth less than half that amount. FDC registered the property improvements as an interest in the property, (indisputably) in priority to the prior mortgagee.
When the property's owner was adjudicated bankrupt, the bankrupt's trustee disclaimed the property (under a provision similar to section 117 of the NZ Insolvency Act). FDC sought to have the property vested in it, on the condition that the mortgagee's charge be removed.
In our October update, we reported on the Court of Appeal decision in Grant v Commissioner of Inland Revenue (see here). The Supreme Court has now declined leave to appeal from that decision.
Recent decisions from the courts have raised the legal risk for directors and underlined the exposure to third party liability of auditors, trustees and promoters.
As a result, we can probably expect this year to have more claims made by receivers, liquidators and out-of-pocket investors against those involved in:
The Insolvency Practitioners Bill is now unlikely to come into force until early 2013 due to the disruption caused by the election. The Finance and Expenditure Select Committee’s report on the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill will also be delayed until next year.
Insolvency Practitioners Bill