In this three part blog we highlight three recent court decisions concerning landlord rights and insolvency, which provide cautionary warnings and surprising twists. The questions we consider are:
- Does a company voluntary arrangement (“CVA”) permanently vary the terms of a lease?
- Can a landlord be forced to accept a surrender of a lease?
- What are the consequences of taking money from a rent deposit if the tenant company is in administration?
In part 1 we consider the first question.
Dealing with pensions in insolvency can be challenging for insolvency practitioners (“IPs”) and the Pension Scheme Bill (“Bill”) presents another.
Whilst a prudent insolvent practitioner should not be unduly alarmed, s114 of the Bill inserts a new section 80B into the Pensions Act 2004 which gives the Pensions Regulator (tPR) power to issue insolvency practitioners with a fine of up to £1 million.
A significant amount, and payable personally!
Can a CVA bind a landlord in respect of future rents? Is the landlord a creditor in respect of future rent? What about the right to forfeit; can a CVA modify that right? Is compromising rent under a CVA automatically unfair to landlords when other trade creditors are paid in full?
These were some of the points considered by the Court in determining whether the Debenhams’ CVA (which had been challenged by landlords) should fail.
One point of particular interest is whether reducing rents below market value in a CVA is automatically unfair to landlords?
Today the Government published draft provisions for inclusion in the Finance Bill which will amend the Insolvency Act 1986 and grant HMRC preferential status on insolvency. A status that was removed in 2003 but which will be re-instated (in part) from 6 April 2020.
Despite huge concern from the lending market, voiced in responses to the Government’s consultation on this measure, the only material change we can see is confirmation that preferential status will not apply to insolvency proceedings commenced before 6 April 2020.
The proposal to reinstate Crown preference in insolvency has met resistance from all angles; the insolvency profession, turnaround experts, accountants, lawyers and funders. But despite HMRC’s bold statement in its consultation paper that the re-introduction of Crown preference will have little impact on funders, it is clear following a discussion with lenders that it may well have a far wider impact on existing and new business, business rescue and the economy in general than HMRC believes.
This week’s TGIF takes a look at the recent case of Mills Oakley (a partnership) v Asset HQ Australia Pty Ltd [2019] VSC 98, where the Supreme Court of Victoria found the statutory presumption of insolvency did not arise as there had not been effective service of a statutory demand due to a typographical error in the postal address.
What happened?
This week’s TGIF examines a decision of the Victorian Supreme Court which found that several proofs had been wrongly admitted or rejected, and had correct decisions been made, the company would not have been put into liquidation.
BACKGROUND
Crown prerogative dates back to the Magna Carta entitling the monarch to absolute priority for revenue related debt. Come 6 April 2020 will we really be heading back to feudal times and 1215?
The proposal to reinstate Crown preference was announced as part of the Autumn Budget last year and came as a surprise to many. The expected consultation paper published by HMRC this week seeks the views of individuals, shareholders, directors, lenders, companies and insolvency practitioners on the proposal to reinstate Crown preference in part.
This week’s TGIF considers a recent Federal Court decision which validated dispositions of property made by a company after the winding up began.
WHAT HAPPENED?
On 8 May 2017, Bond J ordered that a coal exploration company (the Company) be wound up on just and equitable grounds following a shareholder oppression claim. So as to avoid the consequences of a liquidation, his Honour immediately stayed that order for a period of 7 days to enable the warring parties a final chance to resolve their differences.
There has always been a tension between protecting the interests of defined benefit pension schemes and insolvency given on the one hand The Pensions Regulator (TPR) seeks to protect the interests of pension scheme members and the Pension Protection Fund and on the other, the insolvency regime seeks to protect the interests of creditors as a whole.