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.
LONDON - The Court of Appeal in the case of Re Game Station1 has held that rent payable by a tenant that enters administration is a priority expense of the administration while the leasehold premises are being used for the benefit of the administration.
The Supreme Court has boosted the rescue culture by ruling that Financial Support Directions (FSDs) issued by the UK Pensions Regulator after commencement of insolvency proceedings are not an expense of the administration and, instead, rank on a par with unsecured claims. This decision in the Nortel and Lehman administrations will be reassuring to creditors and insolvency and restructuring practitioners.
Key Points
In a case of first impression, a U.S. bankruptcy court charged with enforcing the rights of a foreign insolvency administrator against assets in the United States has held that foreign insolvency law may not be invoked to cancel the rights of licensees of U.S. patents.