Fulltext Search

When individuals and certain entities (such as partnerships, trusts and other unincorporated bodies) have debts that they are unable to repay to their creditors, they may consider or be faced with bankruptcy, which is known as sequestration in Scotland. However, sequestration is just one avenue. Alternative statutory debt solutions are available, which can provide breathing space and allow debts to be repaid over time, without creditor pressure.

The latest quarterly figures from The Insolvency Service for Q4 of 2023, covering the period October to December, show that company insolvency volumes in England and Wales reached a 30-year high. 25,158 registered companies entered some form of insolvency in 2023. The food and drink sector has not been immune to this, and indeed has seen some of the biggest rises in insolvency as many businesses face significant financial challenges.

Multiple headwinds

We have recently published a few blogs on the hot topic of company insolvencies, including more specifically about:

The English High Court decision of Hunt v Singh [2023] EWHC 1784 (Ch) has provided the most substantive authority on directors' duties to creditors since the decision of the Supreme Court in BTI 2014 LLC v Sequana SA and others [2022] UKSC 25 (“Sequana”). The case specifically considered the point at which a director’s duty to take into account the interests of creditors arises.

The festive period is a time for celebrating with loved ones, enjoying food and drink, and exchanging gifts. But it can also bring financial challenges. With rising living costs, interest rates at levels not seen for over a decade, and inflation still high, the cost of Christmas can present a further struggle, leaving many overstretched and facing unmanageable debts and insolvency come January.

A predicted wave of insolvencies on the horizon has been a recurring theme in the UK press since the start of the first Covid-19 lockdown. Most people would have predicted that forced closure of businesses and the restriction on consumers' ability to spend would lead to an increase in business and personal insolvency numbers. In reality, the wave didn't appear - at least not yet. In this blog we discuss the reasons why and whether the trends we are seeing might suggest a wave is coming in 2023.

What stopped the wave?

There are significant differences in the procedures available to lenders north and south of the border when it comes to enforcing fixed charges or standard securities over real/heritable property. In this blog, we will compare the process in England & Wales ("E&W") of appointing a fixed charge or "LPA" receiver with the Scottish calling-up procedure

England & Wales: LPA receivers

Once a company is facing Administration (the most common insolvency process for a trading business – although see tip 2 below), the Administrators may look to sell the business and assets. This could be a pre-pack sale, or a regular administration sale and it may only be advertised to a select group of potential buyers or more widely in the market.

At the recent R3 Scotland Forum[1], experts in the hospitality and leisure sector came together with the restructuring and insolvency profession to discuss the issues the sector is facing as the country emerges from lockdown. The panel discussion which was chaired by Judith Howson, Senior Manager at French Duncan and member of the R3 Scotland Committee was led by Steven Fyfe, head of the Scotland Hotels Divisions within Savills.

CVAs remain the restructuring tool of choice for businesses with multi-let properties. Since the start of the first UK lockdown, there has been a marked increase in the number of CVAs in the hospitality and retail sectors. Whilst vaccines are now being dispensed, the economic ramifications of the pandemic will persist for some time to come and as a result we expect to see many more CVAs being proposed, particularly in these sectors. The introduction of R3's Standard Form COVID-19 CVA Proposal could lead to an increase in the use of CVAs in the SME market too.