What should you do if another business (i.e. a supplier, customer or other contract counterparty) is suffering distress and may be considering filing for insolvency?

This alert provides several “do’s” and “don’ts” to consider before and after insolvency and advises taking a proactive approach to dealing with distressed customers.

We previously considered the potential implications for insolvency professionals of the rise of cryptocurrencies (available here). One of the principal issues identified was the uncertainty surrounding the legal status of cryptocurrencies; what class of asset were they and, subsequently, how would they be treated under English law?

The Government announced an independent review of HMRCs loan charge in September 2019. In this blog we consider the effect of the review on directors who have or are settling claims with HMRC and highlight that the review does not impact on potential claims against directors of insolvent businesses.

Regardless of the outcome of the review, employee benefit trusts (“EBT”) which are not legitimate, are still tax avoidance schemes.

In a recent report by INSOL International, only 5% of insolvency practitioners (“IPs”) said that they had a “comprehensive or practical/working or understanding” of crypto-currency.

So with over 4,000 types of cryptocurrency now available and as payment technology continues to develop, we look at some issues facing IPs, including

• • How to identify cryptocurrency
  • How to categorise it
  • How to take control of it and sell it; and
  • What value does it have

What are cryptocurrencies?

The court offers guidance on reversing lawful dividend payments and when directors need to take intoaccount creditors’ interests.

On 6 February 2019, the UK Court of Appeal published a judgment in BTI v. Sequana that will impact both creditors and directors of English companies.

Section 423 of the Insolvency Act 1986 continues to be a useful tool available to creditors for challenging transactions at an undervalue.

Section 423 gives the English court the power to set aside a transaction (most notably an asset disposal or a dividend) entered into by a debtor if the value of the consideration received by that debtor is significantly less than the value of the consideration the debtor provides to the other party to the transaction. Creditors ought to bear in mind this power when scrutinising a debtor’s previous actions.

Due to the introduction of new tax legislation on 6th April 2016, distributions made to shareholders of companies undergoing Members’ Voluntary Liquidation (MVL) are now treated as income (rather than capital) and are taxed accordingly.