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.

Last week, in Wellness Int’l Network Ltd. v. Sharif, No. 13-935 (May 26, 2015), the Supreme Court held that a bankruptcy court can enter final judgment on “non-core” claims under 28 U.S.C. § 157 if the parties consent to that court’s jurisdiction.  It overturned a decision by the Seventh Circuit that relied heavily on the Sixth Circuit’s decision in Waldman v.

As we expected might happen in light of the Court’s previous order, the parties in the Detroit bankruptcy appeal agreed to postpone oral argument.  In a letter to the parties, however, Judge Gibbons wrote that the appeals should be resolved before near the beginning of the hearing on the confirmation

Last Friday, the Sixth Circuit postponed oral argument in some of the pending cases in the appeal from the bankruptcy judge’s decision that Detroit was entitled to creditor protection under Chapter 9 of the U.S. Bankruptcy Code and could try to alter the terms of workers’ pensions. The postponement was apparently granted to allow various pension groups to settle with the city.

In December, the Sixth Circuit, in Grant, Konvalinka & Harrison, P.C. v. Still (In re McKenzie), 737 F.3d 1034 (6th Cir. 2013), addressed two matters of first impression when it adopted the majority rules that (i) a creditor who seeks relief from the bankruptcy automatic stay has the burden to prove the validity of its perfected security interest in collateral; and (ii) the expiration of the two-year statute of limitations on bankruptcy avoidance actions does not prevent the trustee from asserting them defensively under section 502(d) of the Bankruptcy Code.

A Michigan bankruptcy judge ruled yesterday that Detroit is eligible for protection under Chapter 9 of the U.S. Bankruptcy Code, overruling numerous objections filed by labor unions, pension funds and other interested parties.  Almost immediately following the ruling, a notice of appeal was filed by Counsel 25 of the American Federation of State, County & Municipal Employees (“AFSCME”).