The below is a quick snapshot of three recent tax-related developments in the insolvency and restructuring sphere.
Farnborough – appointment of a receiver and tax grouping
The recent case of Re J T Frith Ltd [2012] EWHC 196 (Ch) shows:
- how secured lenders may surrender their security in order to participate in the prescribed part available for unsecured creditors on insolvency; and
- how intercreditor deeds may be worded to allow senior secured creditors to participate in the prescribed part, despite retaining their security.
Background
RUBIN V EUROFINANCE SA
New Cap Re v Grant
[2012] UKSC 46
Having double dipped and bumped along the bottom, the UK economy's rollercoaster ride looks set to continue for some time to come. Yet despite these grim conditions, it has been surprising to see a year on year decline in the number of companies entering formal insolvency. Our restructuring group reports on the factors at play and their experience of the current market.
Practitioners should be aware that recent comment from a number of the insolvency judges at the Court of Session suggests that the Court is likely to be taking a more interventionist approach to a number of insolvency applications and, as a result, practitioners may wish to review the approach taken to these applications in administration and liquidation cases.
Summary
The High Court has held in the “Extended Liens” application that a “general lien” granted by a client of Lehman Brothers International (Europe) (“LBIE”) over financial collateral held by LBIE as security for obligations owed by the client to LBIE or any other Lehman entity was a valid floating charge, both in relation to the client’s debts to LBIE and its debts to LBIE’s affiliates.
Lazari GP Ltd v Jervis
When a company goes into administration, it benefits from a "moratorium" that prevents creditors taking legal and other proceedings against the company or its assets. The main purpose of the moratorium is to free an administrator's rescue attempts from the distractions of legal action from creditors.
A problem frequently faced by landlords in the current economic climate is that of tenants who time their entry into administration so that it takes place just after rent payable in advance on a quarter day has fallen due. This growing practice has left landlords frustrated and out of pocket.
We all know how busy insolvency practitioners (IPs) were during the recession dealing with the huge rise in corporate and personal insolvencies. That is now feeding into a real spike in professional negligence claims. We briefly summarise some typical claims we are seeing and how best to handle them.
What types of claims are we seeing?
Empty units, falling yields and the spectre of tenant defaults are increasingly common issues that landlords have had to face in the current recession. To add to this landlords have also had to confront a number of high profile CVAs including JJB Sports (twice), Blacks Leisure, Stylo Group, Focus DIY, Fitness First and Travelodge to name a few.