The latest insolvency figures for May show insolvencies continuing to increase, with construction and retail being among the hardest-hit sectors. Company voluntary liquidations continue to top the table, accounting for 85% of the total 2,552 insolvencies for the last month. Compulsory liquidations are also on the rise, particularly driven by HMRC. Small and micro businesses (with annual sales of less than £1m) account for around 99% of all liquidations, according to PWC.

There are many enforcement options available to commercial landlords in England & Wales, to recover rent arrears due under a lease from a business tenant. Some of those options are based in contract and governed by the terms of the individual lease itself, such as a power to forfeit or damages for breach, whilst some of those options are based in statute such as the Commercial Rent Arrears Recovery regime.

In the recent case of Avanti Communications Limited (in administration) [2023] EWHC 940 (Ch), the High Court revisited the perpetually knotty question: what level of control is necessary for a charge over assets to take effect as a fixed, rather than floating, charge?

Given the current financial climate you may wonder what options are open to you or your organisation when you are owed money by a third party. There can often be an assumption that lengthy court processes are required to recover sums due. That is not the case and in this article we consider some of the options available to help recover debts in Scotland.

Pre-Court Action

Statutory Demand

There are several costs associated with presenting a creditor's petition for sequestration (bankruptcy) in Scotland. As you would expect there are court dues for presenting the petition, currently at £122, as well as sheriff officer and legal fees.

With rising insolvency rates, driven in particular by the number of creditors’ voluntary liquidations reaching record highs, the decision in the recent Court of Appeal case of PSV 1982 Limited v Langdon [2022] EWCA Civ 1319 serves as a timely reminder for directors of the personal risks involved in re-using the name of a liquidated company.

With administration figures creeping back up after falling to low levels during the pandemic, the number of pre-pack sales of businesses in administration also appears to be on the increase. In such transactions, a purchaser acquires all, or substantially all, of the business and assets of the insolvent company from the administrator, with the terms of the deal being agreed pre-appointment and completion usually taking place immediately after the administrator takes office.

Key Points

The Coronavirus (Recovery and Reform) Scotland Act was passed by the Scottish Government on 28 June 2022 and enacted on 10 August 2022 (the "Act"). It makes two key changes to insolvency and diligence in Scotland.

Bankruptcy floor limit

On 22 July 2022, judgment was handed down in relation to the sanction of the first Part 26A restructuring plan to be proposed by a small–medium enterprise (SME) in Re Houst Limited [2022] EWHC 1941 (Ch). The restructuring plan (RP) procedure set out in Part 26A of the Companies Act 2006 (CA 2006) has been widely considered to be out of the reach of SMEs due to excessive cost. The decision is also an interesting one for other reasons, notably the cram-down of HMRC as a dissenting creditor.