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.
The case concerned royalty payments, which a creditor had a contractual right to receive, arising from iron ore produced at a mine in Sierra Leone.
Background
The case concerned royalty payments, which a creditor had a contractual right to receive, arising from iron ore produced at a mine in Sierra Leone.
The parent company of the Sierra Leonean mining company went into administration and administrators from PwC were appointed. The creditor's director called the administrators to stress the importance of bringing the royalty payments to the attention of a third party purchaser.
The administrators subsequently sold the mine, but did not make the purchaser aware of the royalty issue.
On 22 April 2015, the Supreme Court handed down its decision in Jetivia SA v Bilta (UK) Limited, unanimously holding that where a company has been the victim of wrong-doing by its directors, that wrong-doing should not be attributed to the company so as to afford the directors an illegality defence.
The result is clear and not a surprising one. The judgments are less clear however. The Court highlighted the difficulties in developing illegality principles of general application for future cases, but then decided now was not the time to try.
Illegality, attribution of knowledge, and Stone & Rolls: Jetivia SA v Bilta (UK) Limited
On 22 April 2015, the Supreme Court handed down its decision in Jetivia SA v Bilta (UK) Limited1, unanimously holding that where a company has been the victim of wrong-doing by its directors, that wrong-doing should not be attributed to the company so as to afford the directors an illegality defence.