According to a recent judgment in the English High Court, Financial Support Directions ("FSDs") issued by the Pensions Regulator ("the Regulator") against companies in administration are to be treated as expenses of the administration. This means that they are to rank ahead of preferential and unsecured creditors and, indeed, perhaps ahead of the remuneration of the administrators themselves.
The recent sale of the bulk of Connaught's failed social housing group has received a lot of positive press attention of late, due largely to the number of jobs the deal is reported to have saved.
The sale appears to have occurred within days of Connaught going into administration. While there has been no suggestion that the deal was effected as a "pre-pack", the speed with which the sale was carried out echoes the most prominent feature of true pre-pack deals.
In our e-update of 20 January 2010, we looked at a decision of the English courts from December 2009 in which it was decided that, in England, the Administrators of a tenant company are bound to account to the landlord of premises for rent due in relation to the period during which those premises are being used in connection with the administration, and that the rent is to be paid as an expense of the administration.
Reversing both the bankruptcy court and the district court, the U.S. Court of Appeals for the Third Circuit held that a trademark licensing agreement had been substantially performed and was therefore not subject to rejection under §365(a) of the Bankruptcy Code. In re Exide Technologies, Case No. 08-1872 (3d Cir., June 1, 2010) (Roth, J.) (Ambro, J., concurring).
KEY POINTS
- A US Bankruptcy Court decision held that loans to a homebuilding company that subsequently filed for bankruptcy constituted a fraudulent transfer.
On October 29, 2009, the California Court of Appeal, Sixth District, in Berg & Berg Enterprises, LLC v. Boyle, et al., unequivocally ruled that, under California law, directors of either an insolvent corporation or a corporation in the more elusively defined “zone of insolvency” do not owe a fiduciary duty of care or loyalty to creditors. In so ruling, California joins Delaware in clarifying directors’ duties when the corporation is insolvent or in the zone of insolvency.
Background
In the current economic climate, disputes, particularly payment disputes, are rife. Consider the following scenario. You arrive at work early on Monday morning, to discover that the supplier with whom you have been having a long-running but relatively minor dispute over payment, has secured a winding up order against your company and appointment of a liquidator from the court. Or, equally distressing, a sheriff officer appears at your door with another form of court order in his hand - an interdict - stopping you from carrying out a key part of your business activities.
A commercial landlord should never assume that, if his tenant goes into administration or liquidation, he will not be able to obtain rent from the administrator or liquidator in respect of the period following appointment of the administrator or liquidator.
One of the more interesting recent appointments in which MacRoberts have been acting relates to the administration of Livingston Football Club Limited ("Livingston") where we acted for Donnie McGruther of Mazars. Donnie was interim manager and subsequently administrator of Livingston.
In a recent interesting Scottish case, HSBC Bank plc, Re an Order to wind up Kirkbride Investment Limited [2009 Scot CS CSOH 147], the Court of Session granted an application to wind up an overseas company and appoint Joint Provisional Liquidators. The company, registered in Gibraltar, was involved in property development in Scotland with the secured lending provided by the Bank.
The Facts