If your company is approaching insolvency, you may be wondering if voluntary liquidation is a possibility. Perhaps if you do not act quickly a secured or unsecured creditor could take the future of the company out of your control, at the same time exposing you and other directors to accusations of wrongful trading?
A Company Voluntary Arrangement (CVA) provides a way for companies in distress to pay off their debts over a fixed period of time, and offers the opportunity to address issues surrounding management and operational systems that were not working.
Pressure from suppliers can be overwhelming when your company is experiencing financial difficulties. Even if it is only a temporary downturn in company fortunes, the fact that a supplier can apply for a winding up order leaves you exposed to compulsory liquidation and closure.
If suppliers have tried unsuccessfully to recover their monies, and your company has failed to respond or been unable to pay, their decision to take legal action could be disastrous.
Finally a decision on whether a bankrupt can be compelled to draw down a pension: The Court of Appeal has finally handed down its long-awaited judgment in Horton v Henry [2016] EWCA Civ. 989, the case determining whether a Trustee in Bankruptcy can compel a Bankrupt to draw down his pension even though the pension is not in payment because the Bankrupt has elected not to call it down.
If you’re a company director then circumstances can arise in which you decide to offer personal guarantees in support of a loan application or your pursuit of a line of credit. Where these guarantees are given, a lender will take some reassurance that they could pursue a director personally for debt repayments in the event of the company becoming insolvent.
The question of whether and under what circumstances a director might find themselves liable for their company’s debts upon entering insolvency can quickly become a very pressing concern.
A summary of recent developments in insurance, reinsurance and litigation law.
This Week's Caselaw
Essar v Norscot: Court confirms that arbitrators can award the costs of litigation funding/time limits for challenging a corrected award
The IECA has released its Master Netting Agreement, a state-of-the-art solution ensuring credit exposures are managed and netted under a single, integrated framework that is flexible and easy to implement.
There has been considerable controversy about the extent of the powers, and the extent of obligations of a business rescue practitioner in relation to a cession of book debts by the company in rescue.
This is an important issue in business rescue because most financially distressed companies have an overdraft facility with a bank which is secured by a cession of debtors. Many practitioners want or need to use the overdraft facility as working capital.
Cession (generally)
Court holds Bankrupt cannot be forced to draw scheme benefits to pay creditors
In its judgment in Horton v Henry the Court of Appeal has held that where a bankrupt member has acquired a right to draw benefits, but has not yet done so (a) his rights under the scheme are not "income" over which the court can make an income payments order under section 310 of the Insolvency Act 1986; and (b) the trustee in bankruptcy cannot compel the member to take his benefits.
Background