When trying to enforce security over property, it is important for a lender to consider the order in which the proceeds of sale will be distributed – a matter decided by the priority of any charges that exist. The general rule is that whichever legal charge is entered onto the charges register has priority, but this isn’t always the case.   

Scenarios where priority may be different 

McKellar v Griffin emphasises the importance for IPs of establishing the COMI of a foreign company before accepting an appointment as administrators. 

In McKellar (decided in June 2014) the court, on the application of a foreign liquidator, declared that the administrators’ appointment was invalid because the company’s COMI was not in England and Wales. So where does that leave unfortunate insolvency practitioners in similar situations? 

In March the Government announced new pension reforms. From April 2015 pensioners reaching 55 years will be entitled to draw down their entire pension pot, to do with as they wish. Pensions minister Steve Webb was famously quoted as saying that pensioners should be able to “buy a Lamborghini” with their pension pot if they so wish. And if pensioners subsequently ran out of money, well, they would have the state pension to fall back on, after all. 

Pension deficits are by no means the only concern for charities, but they present a severe headache.

There are over 180,000 charities registered in England and Wales, employing around 2,660,000. 
Between them, the Charities Commission has reported a combined pensions deficit of over £3.4 billion. For some charities, the burden of meeting that deficit puts too much of a strain on already stretched resources. 

If you’re a secured lender, news of a Chapter 11 filing by your borrower can be unsettling. The commencement of a Chapter 11 case triggers an “automatic stay” which, with certain exceptions, operates as an injunction against all actions affecting the debtor or its property.3 Under the automatic stay, a secured lender holding a security interest in the debtor’s property may not repossess or foreclose on that property without the permission of the bankruptcy court.

The inclusion of pre-bankruptcy waivers in “standard issue” credit documents has generated a host of litigation in bankruptcy cases about the enforceability of such provisions.

A recent decision by the Court of Appeal (CA) in West v Ian Finlay & Associates (a firm) will, in the words of one colleague, “add spice to negotiations”. 

The CA held that a net contribution clause in a professional appointment was effective in limiting liability. The CA held that the clause was both “crystal clear”, noting that the facts of the case did not permit an alternative interpretation, and fair, that is within the meaning of the Unfair Terms in Consumer Contracts Regulations 1999 and Unfair Contract Terms Act 1977. 

In Re Parmeko Holdings Limited the Court had to consider whether to give directions to Administrators where creditors had failed to vote on their proposals. The Court also considered the terms of Administrators’ standard proposals.

In Re Parmeko the proposals provided for the Administrators to:-

• Continue to manage the company’s business and affairs in accordance with the statutory purposes;
• Make payments to secured / preferential creditors;
• Seek one of various exit routes;

And for

From 6 April 2014 Industrial and Provident Societies (IPSs) will be able to enter administration or make a voluntary arrangement with creditors. Formerly winding up was the only option for an insolvent IPS. 

This is a significant development as it extends the corporate rescue culture to these societies, which would otherwise face closure in times of financial distress. 

What is an Industrial and Provident Society? 

On 24 February 2014 the Court of Appeal delivered its long awaited judgment in the GAME Group litigation (Pillar Denton Limited & Ors -v- Jervis & Ors). 

This is an extremely important decision and will affect every trading administration where the company is a tenant.