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?

There has been an influx of company voluntary arrangements (“CVAs”) in recent times, as retailers fight to rescue their UK high street stores. Retail CVAs accounts for the highest proportion of CVAs at 19%. As more and more CVAs are approved, we consider some of the recent trends seen in the retail sector which showcase the flexibility of a CVA and reflect the demands of landlords whose support is vital to the continuing viability of a business.

What is a CVA?

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?

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.

The UK Supreme Court recently handed down judgment in Pimlico Plumbers v Smith1, the latest decision on the hot topic of employment status in the “gig economy”, following the Deliveroo and CitySprint cases in 2017. The court dismissed Pimlico's appeal, holding that the employment tribunal was entitled to find that Mr Smith, who was engaged under a contract describing him as a self-employed plumber, was in fact a worker. He may now proceed with claims of disability discrimination and for unlawful deductions and holiday pay.

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

Case Study: US-based unsecured creditor proactively protects its position and recoveries from the liquidation of its UK distributor

When a company enters into an insolvency process in the UK, the position of unsecured creditors is typically one of uncertainty. Ranking fifth1 in the insolvency payment waterfall, unsecured creditors frequently find themselves out of the money. Even in cases where there are sufficient realizations to make a distribution to unsecured creditors, they may receive only a minimal amount in respect of their outstanding debts.

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.