In the wake of the Eurozone crisis, harmonisation of European insolvency law has been firmly on the political agenda. In December last year, the European Commission proposed amendments to the European Insolvency Regulation (EIR). The UK has until 10 April 2013 to decide whether to opt in. Luci Mitchell-Fry and Sarah Lawson consider the proposed amendments of most interest to banks and other lenders.

Include schemes of arrangement (Schemes)?

In Re JT Frith Limited [2012] EWHC 196 (Ch):

• the terms of an intercreditor agreement; and
• some unwitting help from the junior creditors,

enabled a senior secured lender to benefit indirectly from the prescribed part on the insolvency of its debtor.

Existing law at a glance

The Enterprise Act 2002 introduced the prescribed part under a new section 176A(2) of the Insolvency Act 1986. It reserves part of the floating charge recoveries for unsecured creditors.

Since then, the courts have held that:

Background

The past eighteen months have seen a marked increase in the use of the Company Voluntary Arrangement (“CVA”) by retailers to reduce their lease liabilities and win the release of onerous parent company guarantees, with several high street names going through the process. Although this practice received cautious support from landlords, real concern continues to be voiced over the practice of “guarantee stripping”.

NEW RULES ON PRE-ADMINISTRATION COSTS

Insolvency Practitioners have been eagerly awaiting the implementation on 6 April 2010 of the Insolvency (Amendment) Rules 2010 (“New Rules”). In addition to the many modernising changes made by the New Rules is the long awaited inclusion of what was believed to be a statutory entitlement to recover pre-appointment costs such as in negotiating a pre-pack. as an expense of the administration (New Rule 2.67(1)(h)).

Summary

On 1 July 2009, UNCITRAL adopted the Practice Guide on Cross-Border Insolvency Cooperation. The Practice Guide provides a useful reference source on some practical aspects of cooperation and communication to deal with many of the conflicts and tensions between stakeholders and jurisdictions inevitable in cross-border cases. To ease these tensions, it is often essential for creditors and, importantly, the courts concerned to reach agreement about how the process will be handled.

International context