We first reported on The Trustee in Bankruptcy of Louise St John Poulton v Ministry of Justice in the October 2009 banking update. In short, the Court Service had failed to give notice of a bankruptcy petition to the Chief Land Registrar. As a result, no pending action had been registered against the name of the debtor and no notice had been registered against the debtor's property.

For debtors with limited liabilities, little surplus income and minimal gross assets, the new Debt Relief Order (DRO) is a further tool to consider in managing their debts. DROs, which came into force on 6 April 2009, are aimed at those who find they are unable to pay off their debts within a reasonable time but for whom other forms of debt relief, such as bankruptcy or Individual Voluntary Arrangements, are unavailable, or perhaps unaffordable.

What are the criteria for a DRO?

A DRO can be applied for where the debtor:

Secured creditors with an unsecured shortfall cannot claim a share of the prescribed part of the floating charge realisations set aside for unsecured creditors under Section 176A of the Insolvency Act 1986. This applies whether the secured creditor is the holder of a fixed or a floating charge (or both).

The bank took a charge on the borrowers’ property. In January 1992, it demanded payment of the balance due under the secured facilities. In June 1992, it made a further formal demand specifically relying on the mortgage. One of the borrowers was subsequently made bankrupt. Periodically, the bank informed the borrowers that they continued to be liable and made demands for payment and referred to the mortgage.

When used correctly, pre-pack administrations can be an effective means of creating an opportunity for the rescue of an insolvent business. However, concerns are regularly expressed about the lack of transparency in the sale process and the potential for poor outcomes for unsecured creditors, particularly where a disposal involves connected parties. These concerns have been exacerbated by some unfavourable media reports about a limited number of high-profile cases, and the speed at which transactions are often required to take place in order to preserve value and jobs.

Healthcare workers are on the frontline of fighting COVID-19, but directors of companies have an equally important task, that of keeping the wheels turning and helping minimise the damage to the economy and the livelihoods of their employees, and keeping otherwise viable businesses intact for when the crisis passes.

How should directors respond to the fast-moving situation and the challenges posed by assessing and dealing with the impact on the business?

In our update this month we take a look at some of the recent cases that will be of interest to those involved in insolvency litigation. These include:

If an employer is affected by an insolvency event the insolvency practitioner or official receiver is obliged to notify the trustees of the employer’s pension scheme, the Pensions Regulator, and the Pension Protection Fund of the fact of the insolvency event. Here, we provide an overview of the pensions issues arising from employer insolvency.

Restrictive covenant - if in doubt, lender should be notified; the costs risk of insolvency proceedings; interim payments; service of claim form; Wragge & Co's banking and finance experts bring you the latest on the cases and issues affecting the lending industry.

Restrictive covenant - if in doubt, lender should be notified

In circumstances where a debtor lacks mental capacity to deal with a statutory demand and subsequent bankruptcy petition, the court will rescind or annul a bankruptcy order.