On 26 January 2022, the Covid recovery and Reform Bill (the "Bill") was introduced to the Scottish Parliament. The Bill followed a consultation exercise by the Scottish Government on the proposed changes to Scottish bankruptcy (known as sequestration). These proposed changes generated a good deal of interest with almost 3,000 responses being received from individuals and representative organisations.
The most recent UK and Scotland-specific statistics seem to show that the low comparative levels of corporate insolvency that we have seen as a result of the COVID-19 temporary measures may be coming to an end.
The Accountant in Bankruptcy (AiB), the Scottish equivalent of the Insolvency Service, reports that the number of Scottish companies becoming insolvent or entering receivership increased by over 80% in the second quarter of 2021-22, with 211 companies becoming insolvent compared with 117 in the same quarter of 2020-21.
The latest insolvency statistics have now been released by the Insolvency Service and the Accountant in Bankruptcy ("AiB").
The AiB is responsible for the devolved elements of corporate insolvency, which is limited to liquidation and receivership. The Insolvency Service on the other hand records details on matters for which responsibility is retained at Westminster, being administration and CVAs.
Opening the door for the SME market, Sir Alistair Norris has sanctioned the first ever restructuring plan for a “mid-market” company. The plan sanctioned in Amicus Finance PLC (in administration) is also the first restructuring plan proposed by insolvency practitioners and the first to cram down a secured creditor.
The sanction judgment is short, but the adjourned convening hearing that was dealt with by Mr Justice Snowden (the first hearing was before Mr Justice Trowers) gives some insight into the plan.
CVAs are a useful tool in the restructuring tool kit, and may prove extremely helpful to retailers or hospitality companies as a means of supporting those businesses as they emerge from the pandemic. The flexibility of a CVA and the ability to shape the terms of a proposal to meet the specific needs of a business have seen an increasing number of consumer led businesses use CVAs, and they have become popular as a means to restructure businesses that have a significant lease portfolio.
Following our previous alert that considered rent reductions and modifications to lease terms post New Look and Regis, this alert considers what those CVA challenge cases tell landlords about calculating a landlord's claim for voting purposes and the disclosure requirements.
From 30 April 2021, an administrator will be unable to complete a sale of a substantial part of a company's property to a connected person within the first eight weeks of the administration without either:
- The approval of creditors
- An independent written opinion (positive or negative)
This alert considers the impact of the new regulations in practice, which apply to both pre-packs and post-packs that take place within eight weeks of an administrator's appointment.
When is an evaluator's report required?
The recent Accountant in Bankruptcy v Peter A Davies case examines how a family home is dealt with following sequestration of an individual. The sheriff's comments about the case suggest there could be room for improvement in the Bankruptcy (Scotland) Act 1985, to make the process clearer for everyone involved.
Case background
Last year, temporary changes to the bankruptcy process were brought in by the Scottish Government, to help individuals financially impacted by the pandemic. Scottish ministers have now introduced the Bankruptcy (Miscellaneous amendments) (Scotland) Regulations 2021, to make some of those changes permanent.
The main purpose of these measures is to improve access to minimal asset process bankruptcy ( "MAP" a form of bankruptcy typically aimed at people with low income and few assets) and to reduce the cost for debtors seeking bankruptcy more widely.
From 30 April 2021, an administrator will be unable to complete a sale of a substantial part of a company's property to a connected person within the first eight weeks of the administration without either:
- The approval of creditors
- An independent written opinion (positive or negative)
This alert considers the impact of the new regulations in practice, which apply to both pre-packs and post-packs that take place within eight weeks of an administrator's appointment.