Can they claim for the debts they are owed following the recent compulsory liquidation?

With the sad news that Thomas Cook entered into compulsory liquidation on Monday 23 September 2019, understandably the headlines have focused on the impact of the failure on those holidaymakers who require either repatriation or are now being forced to make alternative holiday arrangements. But what has been the impact on staff? As a global employer of 21,000 employees what are the consequences for them of Thomas Cook’s compulsory liquidation?

Section 127 of the Insolvency Act 1986 (“IA86”) says:

(1) In a winding up by the court, any disposition of the company’s property, and any transfer of shares, or alteration in the status of the company’s members, made after the commencement of the winding up is, unless the court otherwise orders, void.

In the past five years, insolvency rates in the construction industry have increased more quickly than in other industries across the UK. This article considers the common causes of construction insolvency and how to protect your position if insolvency occurs.

Recent trends

Originally published on LexisLibrary and LexisPSL

Restructuring & Insolvency analysis: Thomas Cook is the third large company to be wound up by the courts in 18 months, following British Steel and Carillion in 2018. Professor Andrew Keay, barrister at Kings Chambers, 9 Stone Buildings and Lincoln’s Inn and Professor of corporate and commercial Law at the University of Leeds, discusses why it entered liquidation rather than administration and how it will impact employees and customers of Thomas Cook.

Original news

Agriculture may be the (second?) oldest profession, but it is one that remains ever relevant to modern day life. Farmers are not only producing food, they are also environmental stewards through no other reason than they are the people literally on the ground and on the front line.

The repercussions of Bernard Madoff’s multi-billion-dollar Ponzi scheme are still being felt throughout the offshore and insolvency worlds, over 10 years after the fraud was exposed in 2008.

Its latest appearance came in an appeal to the Privy Council from the BVI courts in UBS AG New York v Fairfield Sentry Ltd (In Liquidation) [2019] UKPC 20. The judgment clarifies important points about BVI insolvency law in cross-border cases.

In But Ka Chon v Interactive Brokers LLC [2019] HKCA 873, the Hong Kong Court of Appeal upheld a lower court's decision to reject an application to set aside a statutory demand. The appellant had argued (among other things) that an arbitration clause in his agreement with the respondent required their dispute to be referred to arbitration.

The CVA challenge

The landlords’ claim against the Debenhams CVA was put forward on five grounds:

1. Future rent is not a “debt” and so the landlords are not creditors, such that the CVA cannot bind them

REJECTED: The definition of “debt” is broad enough to include pecuniary contingent liabilities, such as future rent.

2. A CVA cannot operate to reduce rent payable under leases: it is automatically unfairly prejudicial

Today (19 September), following an expedited trial, the High Court rejected the application brought by affected landlords to challenge the CVA entered into by Debenhams Retail Limited.

The landlord applicants sought to challenge the CVA which closed stores and imposed rent reductions on landlords according to different categories. 'Category 5' landlords took the biggest hit with rents halved and early termination dates imposed. The CVA proposal was approved by Debenhams' creditors on 9 May 2019.

Five grounds were advanced by the landlords during the hearing:

The recent case of Martin v McLaren Construction [2019] EWHC 2059 (Ch) reminds practitioners to make sure that the debt which forms the basis of a statutory demand pursuant to s268(1) of the Insolvency Act 1986, is due and payable.

You might assume that a statutory demand under s268(1) is a demand for payment and therefore monies payable under an “on demand” guarantee can be demand by a statutory demand. However, the Court in Martin v McLaren confirmed otherwise.

The Facts