On 17 September the DWP published a consultation paper (attaching draft regulations) in which it proposes that certain corporate restructurings will not trigger an employer debt under section 75 of the Pensions Act 1995. Following on from amendments introduced by regulations in 2008, the draft regulations also make some technical amendments to the employer debt regime, which are intended to ease its operation in practice.
Section 75: a reminder
Where the Courts Service failed to notify the Land Registry of a bankruptcy petition with the effect that property was disposed of without a pending action having been registered, the trustee in bankruptcy had a right to claim damages.
The Scottish Court of Session Decisions has nixed a scheme of arrangement under the UK Companies Act of 2006, stating it could not be judicially sanctioned without the assent of all creditors. A scheme of arrangement is a reorganization device in which, with the approval of at least three-quarters of a company’s creditors, the company may compromise the claims of all its creditors. A somewhat analogous device might be a “cram-down” under U.S. bankruptcy law, with the important distinction that a scheme of arrangement may be used even by a solvent company.
Some of the customers of Farepak, the failed Christmas hamper company that went into liquidation with BDO Stoy Hayward some three years ago, will apparently soon receive their first dividend cheques out of the insolvency. Perhaps even in time for Christmas 2009!
In William Hare Ltd v Shepherd Construction Ltd, the judgment of which can be accessed here, the consequences of an anachronistic piece of contract drafting cost the losing party over £1 million. The issue here was whether or not the contractor under a building sub-contract could successfully pass the risk of the employer’s insolvency onto its sub-contractor by means of what is commonly known as a “pay when paid” clause.
Structured finance transactions frequently subordinate a swap counterparty’s rights to termination payments upon termination of a swap by reason of counterparty default. Such a provision has recently been upheld by an English court. As the case concerns the insolvency of Lehman Brothers however, the US courts must also make a decision on the same provision.
In August 2009, an English court sanctioned the use of a scheme of arrangement to restructure the debt of IMO Car Wash Group, a highly leveraged UK based car wash company. This decision follows the similar use of schemes of arrangements in other restructurings. For example earlier this year an English court sanctioned the use of a scheme in the debt restructuring of McCarthy & Stone. In both of these restructurings, the subordinated creditors were left with no value for their debt claims.
In August 2009, an English court sanctioned the use of a scheme of arrangement to restructure the debt of IMO Car Wash Group, a highly leveraged UK based car wash company. This decision follows the similar use of schemes of arrangements in other restructurings. For example earlier this year an English court sanctioned the use of a scheme in the debt restructuring of McCarthy & Stone. In both of these restructurings, the subordinated creditors were left with no value for their debt claims.
Summary and implications
Now, more than at any other time of this economic cycle, landlords are faced with the prospect of dealing with tenants who have entered one of the various stages of insolvency and require straightforward solutions to bring their tenancy to an end. Often landlords wish to;
In its previous decision in April the First Tier Tribunal upheld the cross border group relief claims which Marks & Spencer made in respect of its Belgium and German subsidiaries after the subsidiaries had commenced liquidation. The Tribunal held further that, whereas the utilisation of the losses was to be determined by reference to local rules, the unutilised losses had to be re-computed according to UK principles for the purposes of determining the amounts which could be group relieved.