FRC has issued guidance to banks' directors on financial reporting of solvency and liquidity risks, and the definition of going concern, in the context of post-crisis reforms and central bank and government support. (Source: Guidance for Directors of Banks)

Directors and officers beware. Former directors and officers of bankrupt companies can now be found liable to pay clean-up costs for contaminated sites in Ontario, even if the contamination occurred before their tenure.

According to The Times (25 October 2013) the British Property Federation has advised landlords to take larger rent deposits to reduce losses caused by the insolvency of a tenant.

The Insolvency Service have recently reported that they are planning to launch proposals to simplify and re-order the existing Insolvency Rules, replacing them with a single set of rules fit for the 21st century. The present rules have been in force since 1986, providing a framework for the Insolvency Act 1986.

Mr. Justice Popplewell recently dismissed the lawsuit filed by liquidators of Madoff Securities International Ltd after a lengthy trial in the High Court through which they were seeking to recover around $50 million. The ruling exonerated the UK defendants including former Bank Medici AG Chairwoman Sonja Kohn and the Directors of Bernard Madoff’s European organisation, including his children Mark and Andrew.

Lending to a foreign company? If you choose English law to govern your facility documents and provide for the English court to have exclusive jurisdiction, an English scheme may be a viable means of restructuring the debt later, if the need arises.

A new Statement of Insolvency Practice relating to pre-packaged sales in Administration has been issued and has effect from 1 November 2013.

This provides for earlier notification to creditors of the sale and the justification for it and provides a more extensive list of information that must be included.

The main changes are:

Occupational Health and Safety Act charges could proceed against an insolvent company even though it had obtained protection from its creditors under the Companies’ Creditors Arrangement Act (“CCAA”), an Ontario judge has decided.

Terrace Bay Pulp Inc. was charged with offences under the Ontario Occupational Health and Safety Act in relation to two separate incidents, one in which a worker was injured in the company’s wood-handling department, and one in which a worker died after an explosion blew part of the roof off of a mill.

The Court of Appeal’s decision in the matters of Nortel GMBH and Lehman Brothers International (Europe) (both in administration) and other companies has been overturned by the Supreme Court. Liabilities imposed on insolvent companies by the Pensions Regulator (“tPR”) will not be treated as an expense of the insolvency, which would be payable by the office holder in advance of making payment of his own remuneration or to floating charge holders. The liability will rank as an unsecured debt rateably with all other unsecured creditors.

The majority of businesses have periods of stress and distress during their life cycle. The keys to managing these periods to achieve a successful profitable business are recognition, decision and implementation.

In most cases, management are aware (from available internal management information) of issues arising before they do in terms of a potential reduction in revenue or increase in cost. Once these periods are recognised management can move to address them by taking decisions to manage the situation to a positive outcome.