The High Court has found the former directors of collapsed retail chain BHS liable for wrongful trading, misfeasant trading and individual acts of misfeasance.

Although overall quantum is yet to be decided, this has been widely reported as the largest wrongful trading award the courts have made since the introduction of the Insolvency Act 1986.

Insolvency officeholders seeking to realise claims or other rights of action will take comfort from the Court of Appeal’s decision in Re Edengate [2022] EWCA Civ 626.

The Court held that failure by a liquidator to give a defendant the opportunity to buy or settle a claim against it before selling the claim to a third party is not necessarily perverse. However, it may often be sensible or good practice to do so.

The FCA has published finalised guidance for insolvency practitioners (IPs) appointed (or looking to be appointed) over regulated firms.

This sets out the FCA’s expectations as to how IPs can ensure firms continue to meet their regulatory obligations both before an appointment and during the course of an insolvency process. It confirms the FCA’s view of what would constitute good practice, as well as linking in to some of the existing statutory obligations on regulated firms and/or IPs.

The National Security and Investment Act 2021 creates a new screening regime for transactions which might raise national security concerns in the UK. It passed into law on 29 April 2021 and is expected to come into effect by autumn 2021.

However, as the Act has retrospective effect from November 2020, insolvency practitioners need to understand the implications for insolvency sales taking place now. We have summarised the headline issues for insolvency practitioners below.

You need to consider the impact of this Act on transactions that are taking place now.

Voluntary measures to scrutinise pre-pack sales to connected parties have not been enough to alleviate creditor concerns, says the Government. A new regulatory framework governing connected party sales in administration will be put in place before the end of June 2021. Draft regulations were published on 8 October 2020.

Introduction

The concept of winding up does not exclusively apply to insolvent companies. Solvent companies can also be wound up, on the initiation of the company’s directors and shareholders (for example, as part of a corporate reconstruction or to close down non-operating or redundant entities). 

An overview of the two key procedures to effect the dissolution of a solvent Australian company, being Members’ Voluntary Liquidation and Deregistration, is set out below. 

In brief

Even with the fiscal stimulus and other measures taken by the Federal and State governments in Australia, corporate insolvencies are likely to increase in coming months.

Under Australia's insolvency regimes, a distressed company may be subject to voluntary administration, creditor's voluntary winding up or court ordered winding up (collectively, an external administration). Each of these processes raises different issues for the commencement and continuation of court and arbitration proceedings.

In summary

In our previous alert we discussed how Justice Markovic in the Federal Court of Australia had granted the administrators of retailer Colette Group relief from personal liability for rent in respect of 93 stores.  

The Australian Federal Court has made orders relieving the administrators of retailer Colette from personal liability for rent in response to the COVID-19 crisis and the current uncertainty in respect of government policy about rent relief for tenants: see

What you need to know

Amendments to the Corporations Act 2001 (Cth) (Corporations Act) to implement the measures announced by Treasurer Josh Frydenberg on Sunday, 22 March 2020 to provide temporary relief for financially distressed businesses due to COVID-19 have now come into effect.

The Coronavirus Economic Response Package Omnibus Act 2020 (Cth) (CERPO Act) amendments were passed by the Parliament on 2 March 2020. They will apply for a 6 month period, but may be extended or have impacts beyond that timeframe.