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.
Carpetright, the UK flooring company, has announced that it is considering a Company Voluntary Arrangement with the aim of “rationalising the company’s property portfolio in order to improve the long-term prospects of the business”. This is expected to enable the business to close unprofitable shops and reduce their rent bill. With 409 shops across the country, any proposed CVA is going to have a significant impact on landlords.
Media attention has waned from the initial deluge of front-page headlines regarding the Carillion collapse. It would therefore be easy to be ignorant of the ongoing disintegration of the web of Carillion companies beneath Carillion Plc, the ultimate parent company of the Carillion group, which (according to its latest accounts) holds interests in over 350 subsidiaries or joint ventures all over the world.
The Insolvency Rules (England and Wales) 2016 (“IR2016”) came into force on 6 April 2016 applying to most corporate and personal insolvency regimes in England and Wales. However, there is still unfinished business for the Government and further regulation is expected to be introduced later this year to ensure the changes apply uniformly in all areas.
The recent case of Thomas & another v Frogmore Real Estate Partners & others [2017] EWHC 25 (Ch) provides useful guidance for anyone analyzing the centre of main interests (“COMI”) of a company not registered in the UK or other EEA state for the purposes of assessing whether or not insolvency proceedings relating to the company can be instigated in the UK courts under the EC Regulation.