When a company is in financial distress, its directors will face difficult choices. Should they trade on to trade out of the company's financial difficulties or should they file for insolvency? If they delay filing and the company goes into administration or liquidation, will the directors be at risk from a wrongful trading claim by the subsequently appointed liquidator? Once in liquidation, will they be held to have separately breached their duties as directors and face a misfeasance claim? If they file precipitously, will creditors complain they did not do enough to save the business?

On 23 January 2024, the English Court of Appeal set aside the April 2023 order of the High Court sanctioning the English Part 26A restructuring plan (the “Plan”) proposed by AGPS BondCo plc (the “Plan Company”), a subsidiary of Adler Group SA (Adler Group SA and its subsidiaries being the "Adler Group"). The successful appeal was brought by an ad hoc group of holders of the Adler Group's 2029 notes (the "AHG"). The practical consequences of this decision for the Adler Group's restructuring remain to be seen.

In figures released on Friday 28 July 2023 from the Insolvency Service, the total number of registered company insolvencies in England and Wales during Q2 2023 was 6,342, the highest since Q2 2009 and up by 9% compared to Q1 2023. The construction industry was again the hardest hit (a trend going back over a decade). Whilst more construction companies went into administration during Q2 compared to Q1, significantly higher numbers went quietly into liquidation during the same period, at an average rate of around 11 per day.

The construction industry trade press frequently writes about administrations in the industry. Whilst the Insolvency Service's figures show that around one construction company went into administration every other day in Q1 2023, significantly higher numbers went quietly into liquidation during the same period.

Each week we are seeing stories in the news about construction companies becoming "insolvent", going into "liquidation" or having "administrators" appointed. But what do these terms mean? Insolvency is a complex area of law with its own terminology, so we've broken down what all the terms mean below.

What is insolvency and what happens to a company when it is insolvent?

The administrators of Avanti Communications Limited (the “Company”) sought directions from the High Court as to whether purported fixed charges in favour of the secured lenders to the satellite operating business should be recharacterised as floating charges (In the matter of Avanti Communications Limited (In administration) [2023] EWHC 940 (Ch)).

Summary of decision

Although the IMF recently announced at Davos that it would upgrade its global economic forecasts, with an improvement predicted in the later part of 2023 and into 2024, times remain difficult for many companies and their lenders – and are likely to remain so for a while yet.

Further to our previous article, which can be found here, we consider the key issues with which the Court faced, the technical legal analysis underpinning this judgment and our view on what this may mean for energy suppliers, and the sector as a whole, looking forward.

Background - what was the application and why was it needed?

Introduction

The UK Supreme Court has recently delivered a landmark decision in the case of BTI 2014 LLC v Sequana S.A. [2022] UKSC 25. The decision is of great importance as the Supreme Court considered in detail whether the trigger for the directors’ duty to consider creditors’ interest is merely a real risk, as opposed to a probability of or close proximity to, insolvency.

Background

簡介

英國最高法院最近在BTI 2014 LLC v Sequana S.A. [2022] UKSC 25一案中頒下了重要裁決，其重要之處在於最高法院深入探討了董事考慮債權人權益的責任，是只需出現真正的無力償債風險便已觸發，還是在相當可能或瀕臨無力償債時才觸發。

背景

本案的第二及第三答辯人為AWA公司（「該公司」）的董事。於2009年5月，他們安排該公司向該公司唯一股東（「第一答辯人」）派發1.35億歐元的股息（「該股息」），以抵銷第一答辯人結欠該公司的債務。該公司在支付該股息時，其資產負債表及現金流均處於具償債能力的狀況。然而，該公司有一項與污染相關而金額未定的長期或然負債，導致該公司產生未來可能無力償債的真正風險。