From 1 December 2020 onwards, HMRC will be treated as a preferential creditor of companies for certain taxes including PAYE, VAT, employee NICs and Construction Industry Scheme deductions. In the event that a company enters administration or liquidation, HMRC's claim for these taxes will rank ahead of any floating charge holder.

This reflects recent changes made to the Finance Act 2020.

The impact on floating charge holders

On 13 January 2021, the English High Court sanctioned three interconditional Part 26A restructuring plans for the subsidiaries of DeepOcean Group Holding BV.

The plans for two of the companies were approved by the required 75% majority. While the third plan received 100% approval by secured creditors, only 64.6% of unsecured creditors voted in favour.

Consequently, at the sanction hearing the court was required to consider whether the cross-class cram down mechanism in the restructuring plan should be engaged for the first time in the UK.

On 11 February 2021, the English High Court confirmed in gategroup Guarantee Limited that restructuring plans are insolvency proceedings so are not covered by the Lugano Convention.

One of the debt instruments subject to the gategroup restructuring plan contains an exclusive Swiss court jurisdiction clause. Under the Lugano Convention, proceedings relating to "civil and commercial matters" must generally be brought in the jurisdiction benefitting from the exclusive jurisdiction clause.

In Uralkali v Rowley and another [2020] EWHC 3442 (Ch) – a UK High Court case relating to the administration of a Formula 1 racing team – an unsuccessful bidder for the company's business and assets sued the administrators, arguing that the bid process had been negligently misrepresented and conducted.

The court found that the administrators did not owe a duty of care to the disappointed bidder. It rejected the claimant's criticisms of the company’s sale process and determined that the administrators had conducted it "fairly and properly" and were not, in fact, negligent.

In Uralkali v Rowley and another [2020] EWHC 3442 (Ch) – a UK High Court case relating to the administration of a Formula 1 racing team – an unsuccessful bidder for the company's business and assets sued the administrators, arguing that the bid process had been negligently misrepresented and conducted.

The court found that the administrators did not owe a duty of care to the disappointed bidder. It rejected the claimant's criticisms of the company’s sale process and determined that the administrators had conducted it "fairly and properly" and were not, in fact, negligent.

In a June 20, 2018 opinion, Judge Carey of the United States Bankruptcy Court for the District of Delaware sustained an objection to a proof of claim that had been traded during the bankruptcy case and filed by the claim purchaser. The opinion highlights the importance of being vigilant in conducting diligence before acquiring a claim against a bankruptcy debtor, especially regarding the ability of the original creditor to assign the claim without the debtor’s consent.

When creditors are left holding the bag after providing valuable goods or services to a company that files for bankruptcy relief, they often feel misused and that an injustice has occurred. After all, they are legitimately owed money for their work or their product, and the debtor has in effect been unjustly enriched because it received something for nothing. Unsecured creditors do not have recourse to collateral, and typically have to wait in line to receive cents on the dollar.

On August 4, 2017, the Third Circuit Court of Appeals issued its ruling in Varela v. AE Liquidation, Inc. (In re AE Liquidation, Inc.), 2017 U.S. App. LEXIS 14359 (3d Cir.

In Metropolitan Government of Nashville & Davidson County v. Hildebrand, the Sixth Circuit Court of Appeals explains how to read the phrase “applicable nonbankruptcy law” as it is used in the United States Bankruptcy Code. The case – a chapter 13 individual bankruptcy case – discussed the phrase in the context of section 511(a) of the Bankruptcy Code, which deals with the appropriate rate of interest applicable to tax claims.

In Metropolitan Government of Nashville & Davidson County v. Hildebrand, the Sixth Circuit explains how to read the phrase “applicable nonbankruptcy law” as used in the Bankruptcy Code. The chapter 13 individual bankruptcy case discussed the phrase in the context of 11 U.S.C. § 511(a), which provides that the appropriate interest rate for tax claims is whatever “applicable nonbankruptcy law” provides.

The decision