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 Pension Schemes Bill promised in the Queen’s Speech has been introduced into Parliament. At nearly 200 pages the Bill is comprehensive, wide-ranging and ticks many of the boxes on the Pensions Regulator’s wish list. It substantially reflects the Bill which briefly appeared in the autumn: this time, it seems likely to make it to the statute book. The Bill as drafted has potentially far-reaching implications, if it is passed substantially in its current form.
Transactions and restructuring
The Court of Justice of the EU (CJEU) has held once again that the Insolvency Directive does not require member states to put measures in place to fully fund lost pension rights on the insolvency of an employer. This conclusion is contrary to some reporting in the pensions press earlier today.
The Court of Justice of the European Union (CJEU) has ruled today that the Pension Protection Fund regime does not satisfy European law requirements. The judgment is likely to have a significant impact on the PPF, and could have wider knock-on effects for many occupational pension schemes.
Background to the case
The Pensions Regulator has today issued a Statement on its power to issue financial support directions (“FSDs”) against companies after an insolvency event has occurred. The Statement follows longstanding concerns of insolvency practitioners, which have arisen from ongoing court proceedings brought by the Lehman Brothers and Nortel administrators.
Background