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.

Key point

An assignee of future debts was bound by discounting and rebate arrangements concluded between the assignor and its customers despite having given notice of the assignment.

The facts

M supplied goods to customers. It factored its debts to Bibby in 2000. The Factoring Agreement provided that all future debts due to M by customers were to vest upon their creation in Bibby.

Bibby did the following to try and protect its position – ultimately the steps proved unsuccessful:

There have been a couple of cases in the last few months where the impact of changes to the details of the various registers at Companies House has been considered by a Court. This article considers the points of interest for lenders that arise out of those decisions

What use is an LP registration certificate?

Not much in the case of a certificate that relates to a limited partnership (one to which the Limited Partnership Act 1907 applies not the limited liability partnership variety).

Key Point

The High Court has given some guidance on the effect of an order to restore a dissolved company to the register where a secured creditor has rights against that company and there has been a disclaimer by the Crown.

Facts

Key point

The Joint special administrators of an investment banking entity succeed in obtaining a direction to allow them to distribute client assets quickly.

Facts

Key point

The Court of Appeal has recently given detailed guidance on what happens to the surpluses available in the insolvency of companies after dealing with an appeal in relation to the so-called Lehman Waterfall Application dealt with in an earlier Update.

Facts