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.

Ultra court clarifies the requirements for classifying a creditor as “unimpaired” under a plan of reorganization.

Key Points:

• Texas bankruptcy court splits from Third Circuit in finding that a creditor must receive everything it is entitled to under non-bankruptcy law in order for the creditor to be “unimpaired.”

• The decision does not require that unsecured creditors receive post-petition interest but provides that they will be “impaired” if they do not

Second Circuit holds that Bankruptcy Code preempts creditors’ state law constructive fraud claims.

Introduction

Senior Transeastern Lenders v. Official Comm. Of Unsecured Creditors of TOUSA, Inc. (In re TOUSA, Inc.), 2012 US App. LEXIS 9796 (11th Cir. May 15, 2012)

“In chapter 11, a creditor should be able to assert the full amount of any guarantee claim against the debtor without reducing the claim for recoveries against another obligor.”

“Whether the Nortel Senior Notes will be entitled to post-petition interest, and at what rate, in the chapter 11 cases are open questions that may hinge, among other things, on proving solvency of the Nortel chapter 11 debtors.”