2018 was the "year of the CVA", slashing rents and forcing landlords to get to grips with long-winded CVA proposal documents in an attempt to allow struggling tenants to manage their debts, turn around their businesses and avoid terminal insolvency situations.

The unfortunate reality is that even if they are approved by landlords and other creditors, not all these CVAs will be successful and many tenants are likely to end up in administration.

To no great surprise, the Global Corporate v Hale appeal decision has gone against the director. The Court of Appeal handed down the eagerly awaited judgment on 27 November 2018.

This article was first published on Lexis®PSL on 15 November 2018.

Crumpler and another (Joint liquidators of Peak Hotels and Resorts Ltd in liquidation) v Candey Ltd, [2018] EWCA Civ 2256, [2018] All ER (D) 78 (Oct).

What are the practical implications of this case for practitioners?

A High Court Master has found that the court must maintain privilege in the documents of a dissolved company unless and until there is no prospect of the company being restored to the register: Addlesee v Dentons Europe LLP: [2018] EWHC 3010 (Ch).

Directors cannot avoid unlawful distribution claims by asserting that dividends should be retroactively re-categorised as remuneration for services they have provided to the company, the Court of Appeal has confirmed in Global Corporate v Hale [2018] EWCA Civ 2618

The court confirmed that the legality of a payment to directors must be tested at the time when it is made. Any "subsequent realisation that the distributions should not have been made" will not cure an unlawful distribution.

Since the introduction of The Companies Act 2014, directors have relied on the Summary Approval Procedure as a means of sanctioning certain activities that are otherwise prohibited.

While it has been a welcome development in simplifying financial transactions, directors need to be mindful of the appropriate steps to be taken so they are not leaving themselves open to committing an offence or being personally liable for the debts of a company.

Background

If a company goes into liquidation, the liquidator is able to disclaim the whole of an insolvent tenant’s liability under a lease. The disclaimer ends all of the tenant’s rights, interests and liabilities, effectively meaning that the tenant can get out of the lease early. This can have a significant impact on a landlord, whose expected income from the property suddenly comes to an end.

Greatest focus will be on retail and outsourcing sectors.

Key points

The face of the UK's high streets and shopping centres continues to change rapidly as consumers, shopping and leisure habits change and evolve.

In this latest article in our "future of consumer" series, we look at the continued use of company voluntary arrangements (CVAs) by retailers (and restaurant owners) to reduce their exposure to landlords under their leases and ask what are the trends and the future direction of this restructuring procedure.