It’s been a difficult last few years for the licensed trade and the hospitality and leisure sector generally, both in terms of recovery from the Covid-19 pandemic and, more recently, the wider economic challenges facing the industry.

The threat of insolvency looms large and with it comes various regulatory considerations for insolvency practitioners (IPs): firstly, liquor licensing considerations that might arise post-appointment and, secondly, broader health and safety issues that can shift into sharp focus.

Premises licences

It has been long-established by the classic fundamental principles of corporate law that companies are separate and distinct persons from their shareholders, directors and officers. From this flows the general principle that it is the company, and the company alone, that can be liable for its obligations. This holds even in cases of companies linked by direct and indirect share participation and which are, in their entirety, dominated by a parent company, often a mere holding company without any business activity. These are referred to in corporate jargon as “corporate groups”.

The recent administration of heavily indebted Uganda Telecom Limited (“UTL”) aims to achieve the best outcome for creditors and shareholders. Below, we unpack the implications of the administration for UTL’s creditors and other stakeholders.

The decision of the Inner House of the Court of Session was released last week in the keenly awaited application by the liquidators of Scottish Coal who sought directions on whether a liquidator appointed to a Scottish company could:

In recent years, the Companies and Intellectual Properties Commission (“CIPC”) (and its predecessor, the Companies and Intellectual Property Registration Office (“CIPRO")) has been carrying out mass de-registrations of companies and close corporations for failure to file their annual returns. This phenomenon, and its severe negative effects on third party creditors, has been the focus of much legal scholarship. However, a short while ago it came to our attention that CIPC’s de-registration campaign also extends to companies that have been placed in liquidation.

We recently reported on the Court of Session's decision that a liquidator of a company being wound up in Scotland may abandon both heritable property and statutory licences. A full copy of that article can be accessed here.

The Court has now issued its written decision. This provides further analysis and confirms the position that we previously reported.

Parties represented

The Court of Session has held that a liquidator of a company being wound up in Scotland may abandon both heritable property and statutory licences. Affected creditors will have the right to submit a claim in the liquidation process. In the absence of that creditor holding security, the claim will rank as an unsecured claim.

Background

The Court of Appeal has issued further guidance on the thorny issue of the application of the TUPE Regulations to administration proceedings.  While many practitioners will feel that the decisions are not helpful in trying to achieve business sales in what is already a challenging market, insolvency practitioners (IPs) nonetheless need to be aware of the clarity that these cases have brought. The key points to note are:

OTG v Barke is the latest case from the Employment Appeal Tribunal (EAT) to consider how the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) apply in the context of the sale of a business in administration. The case largely resolves the uncertainty in that context and affirms the general practice of administrators and purchasers of businesses from them.

In the 2011 budget speech, the Minister of Finance announced that the Government will consider exempting taxable capital gains or ordinary revenue imposed on an insolvent debtor if the debt owing by the debtor is cancelled or reduced.