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.

With the gradual opening of energy supply markets allowing new energy providers to challenge the established providers and bring increased competition to the market, the last two decades have seen an increase in smaller energy providers entering the market and sharing a growing customer base. But what happens to the customers when an energy provider becomes insolvent?

2018 has seen a wave of company voluntary arrangements ("CVAs") hit the market, with high profile companies such as House of Fraser, Carpetright, New Look and Homebase (to name a few) all making use of this restructuring tool. This briefing note explains how a CVA works, provides an overview of current "market" themes, and makes some predictions on the future of CVAs.

EVOLUTION OF THE CVA

2018 has seen a wave of company voluntary arrangements ("CVAs") hit the market, with high profile companies such as House of Fraser, Carpetright, New Look and Homebase (to name a few) all making use of this restructuring tool. This briefing note explains how a CVA works, provides an overview of current "market" themes, and makes some predictions on the future of CVAs

EVOLUTION OF THE CVA

The case of Davey v Money and Anor (2018) EWHC 766 (Ch) should serve as a gentle warning to secured creditors to be aware of the level of their involvement in the administration of a customer.

Background

Angel House Development Limited (“AHDL“), a property development company, borrowed £16 million from Dunbar Assets Plc (“Dunbar“) in order to fund the purchase and redevelopment of a property, Angel House, in Tower Hamlets. Dunbar took security for the loan(s) in the form of a debenture.

HM Revenue & Customs (“HMRC”) has issued a consultation entitled “Tax Abuse and Insolvency: A Discussion Document” on how it proposes to confront those who misuse insolvency law as a means of avoiding or evading their tax liabilities.

A recent decision of the High Court (Goel and another v Grant and another [2017] EWHC 2688 (Ch)) has provided a useful reminder that care must be taken when administrators enter into pre-contract negotiations and the risk of inadvertently entering into a binding contract before terms are finalised. It also deals with the risks of disposing of assets, even those that are difficult to value, without due process.

The Facts

An out-of-hours office appointment of an administrator, although not unusual, is not a regular occurrence in the world of insolvency. It is however, exactly what happened at 4am on Monday 2 October, as Britain’s longest surviving airline brand ‘Monarch’ entered administration. The collapse of the airline comes as a result of mounting cost pressures in an increasingly competitive market and is the third European airline insolvency in 2017, following Air Berlin and Alitalia.

The recent Court of Appeal decision in Saw (SW) 2010 Ltd and another v Wilson and others (as joint administrators of Property Edge Lettings Ltd) is the first case to address the effect of automatic crystallisation of an earlier floating charge upon a later floating charge.

SAW (SW) 2010 Ltd & Anor v Wilson & Ors [2017] EWCA Cif 1001 (25 July 2017)

The Court of Appeal has held that the validity of a floating charge (and the appointment of joint administrators under that floating charge pursuant to paragraph 14 of Schedule B1 to the Insolvency Act 1986) does not depend on the existence of uncharged assets of the company at the time of its creation, nor upon the power of the company to acquire assets in the future.

BACKGROUND