In the recent case of Re Avanti Communications Ltd (In Administration)1, the High Court considered whether charges granted by a satellite business over certain equipment and intangible assets (the Relevant Assets) were fixed or floating.
The UK government introduced the Corporate Insolvency and Governance Bill (CIGB) to Parliament on 20 May 2020. As well as including temporary measures to help support businesses affected by COVID-19, it proposes significant permanent changes to UK insolvency law. These proposed permanent changes include a new company moratorium: a mechanism to give a company in financial difficulty a temporary breathing space against creditor action, during which the directors remain in control, but overseen by a monitor.
The Court of Justice of the European Union (CJEU) has given a preliminary ruling on when a security holder has "possession or…control" of financial collateral for the purposes of Directive 2002/47 on financial collateral arrangements. From an English law perspective, this is particularly relevant for anyone considering whether a floating charge over financial collateral qualifies as a security financial collateral arrangement (or SFCA).
Background – UK implementation and interpretation
Background
Under the Pensions Act 2004 the Pensions Regulator (tPR) has the power to impose a financial support direction (FSD) requiring a company “connected or associated” with the sponsoring employer of a UK pension fund to provide financial support to the pension fund. To date tPR has used the power in insolvencies.
The insolvency of the borrower is a standard event of default in facility agreements. As well as covering the borrower's cash flow insolvency, these clauses also often cover other, earlier signs of distress. Two recent cases have seen lenders try to exploit these outer reaches of their insolvency event of default clauses. Hayley Çapani and Adam Pierce explain why these cases are significant for parties negotiating new deals, and for lenders considering their enforcement options on existing deals.
Negotiations with creditors for rescheduling
This summer has seen several pension issues making the news. They show how essential it is for employers and trustees to keep abreast of how developments impact on their arrangements.
Jay Doraisamy looks at five areas which have made the headlines this summer:
In Re JT Frith Limited [2012] EWHC 196 (Ch):
- the terms of an intercreditor agreement; and
- some unwitting help from the junior creditors,
enabled a senior secured lender to benefit indirectly from the prescribed part on the insolvency of its debtor.
Existing law at a glance
The Enterprise Act 2002 introduced the prescribed part under a new section 176A(2) of the Insolvency Act 1986. It reserves part of the floating charge recoveries for unsecured creditors.
Since then, the courts have held that:
KEY POINTS
The High Court has recently considered whether a bankrupt individual of pensionable age can be forced to draw his pension to pay his creditors.
Raithatha v. Williamson [2012] EWHC 909 (Ch)
Background
A bankruptcy order was made against Mr Raithatha on 9 November 2010. Mr Raithatha's trustee in bankruptcy applied for an income payments order (IPO) against Mr Raithatha's pension shortly before he was due to be discharged from bankruptcy. Mr Raithatha was then aged 59 and his pension scheme allowed him to draw a pension from age 55.
Pension scheme assets can rise and fall. So can liabilities. The timing of the section 75 debt calculation is, therefore, critically important to the ability of the scheme to meet its liabilities.
So when should trustees calculate their section 75 debt? Can they use one date to calculate scheme assets and choose a different date to calculate the cost of buying out the scheme’s liabilities?