Business rates liability is complex and the question of who is liable if occupiers become insolvent is one that often arises during periods of economic uncertainty, such as the pandemic.
Business rates liability for insolvent companies
Business rates liability attaches to specific units of property known as “hereditaments”.
Hurstwood Properties (A) Ltd and others (Respondents) v Rossendale Borough Council and another (Appellants)
The Supreme Court has delivered its keenly anticipated judgment in a case concerning the validity of two business rates mitigation schemes. The schemes under scrutiny involved property owners letting unoccupied properties to special purpose vehicles (“SPVs”) which benefitted from a business rates exemption and therefore allowed both the property owners and the SPVs to avoid liability for business rates.
The CVA challenge
The landlords’ claim against the Debenhams CVA was put forward on five grounds:
1. Future rent is not a “debt” and so the landlords are not creditors, such that the CVA cannot bind them
REJECTED: The definition of “debt” is broad enough to include pecuniary contingent liabilities, such as future rent.
2. A CVA cannot operate to reduce rent payable under leases: it is automatically unfairly prejudicial
In recent years, several foreign companies have used the English law scheme of arrangement as a flexible restructuring method to compromise creditor claims. The decision of the High Court in the latest of these cases, that of the German company Rodenstock GmbH, clarifies that an English court will accept jurisdiction where the only connection to England is that the company’s finance documents were governed by English law.
One of the many issues which arose from the collapse of Lehman Brothers was whether “flip provisions”, which reverse a swap counterparty’s priority in the order of payment on insolvency, were invalid on the basis that they contravened the anti-deprivation principle. This is a long-established common law principle which seeks to prevent an insolvent party from arranging its affairs to frustrate the legitimate claims of creditors.