The Supreme Court handed down its long-awaited judgment in BTI 2014 LLC v Sequana SA on 5 October 2022. This important case addresses the duties of directors to consider the interests of creditors as a company approaches insolvency.

While the judgment will be welcomed by many as providing some useful guidance on a number of issues, there still remain some key areas of uncertainty which, as we consider in further detail below, will present clear challenges for directors seeking to navigate their way through a company’s financial difficulties.

Four directors have been disqualified for abusing the dissolution process pursuant to powers introduced by the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 (the Act). In each case, the director secured a bounce back loan on behalf of their company before taking steps to dissolve the company in an attempt to avoid repaying liabilities under the scheme.

The government’s monthly insolvency statistics for June 2022 paint a picture of an economy that is still struggling to return to pre-pandemic profitability. Company insolvencies were 40% higher than for the same period last year and 15% higher than in June 2019 (i.e. pre-pandemic levels), with the increased level of insolvencies being largely driven by the higher number of creditors’ voluntary liquidations.

The Court of Appeal has held that the Electronic Money Regulations 2011 do not impose a statutory trust in respect of funds received from e-money holders (who nonetheless enjoy priority status in respect of their creditor claims), providing some much-needed clarity on this issue for e-money institutions and their clients.

A link to the judgment can be found here.

Background

In what is believed to be the first reported decision on this issue, the High Court has allowed an appeal under section 205(4) of the Insolvency Act 1986 (IA 1986) against a decision of the Secretary of State to defer the dissolution of a company in liquidation.

A link to the judgement can be found here.

The facts

In FCA v Carillion [2021] EWCH 2871 (Ch), the High Court has confirmed that Financial Conduct Authority (FCA) enforcement action against Carillion Plc (in Liquidation) (Carillion) pursuant to certain provisions of the Financial Services and Markets Act 2000 (FSMA) does not constitute an “action or proceeding” and therefore falls outside of the scope of the statutory stay imposed by section 130(2) of the Insolvency Act 1986 (the Act).

Section 130(2) of the Act

Regulations have been published which, from 1 October 2021, will change the current restrictions on the use of winding up petitions (the regulations). A link to the regulations can be found here.

In summary, the regulations partially lift the temporary restriction on the use of winding up petitions imposed by the Corporate Insolvency and Governance Act 2020 and provide that:

AML changes for court-appointed liquidators

Important changes for court-appointed liquidators to the regulations under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (Act) will come into force on 9 July 2021.  These changes provide that, for a court-appointed liquidator:

The High Court has released its judgment in Re Halifax NZ Limited (In liq) [2021] NZHC 113, involving a unique contemporaneous sitting of the High Court of New Zealand and Federal Court of Australia.

The Insolvency Service published its quarterly insolvency statistics for the period January to March 2021 (Q1 2021) on 30 April 2021. By way of comparison, see our previous update on the Q4 2020 statistics here.

The published statistics for the first quarter of 2021 continue the downward trend seen in the previous 12 month period, with company insolvencies falling overall by 22% from the previous quarter.