The legal market in Scotland has changed over the last year, although perhaps not to the extent that anyone would have predicted. Firms have, in general terms, coped well with remote working and are beginning to cope well with hybrid working too. Traditional streams of work have been maintained and while some practice areas, such as insolvency and restructuring, have been quieter than anticipated, that has not had a significant impact on the bottom line. So, what can we expect in 2022?

1. Insolvencies will rise – even if we don’t experience the “tsunami”

Climate change is centre stage and our use of land and its effect on the climate are intertwined.

Land is a precious resource. "Buy land, they're not making make it anymore" - in these seven words, Mark Twain captures the mood of a nation. Land is a safe economic resource, until it is not. I am not sure if Mark Twain would have taken the same view with regard to contaminated land and to paraphrase Mr Orwell, "all [contaminated land] is born equal, but some [is] more equal than others".

In September 2020, I wrote a piece on the above case in the Chancery Division of the High Court, which can be found here and here.

On 29 September 2021 the High Court dismissed a challenge to Caffè Nero’s 2020 CVA brought by one of its landlords, Ronald Young. Young asserted that the CVA was unfairly prejudicial and subject to material irregularities (thereby engaging both grounds of challenge under s.6 of the Insolvency Act 1986), and that the CVA nominees and company directors had breached their duties by failing to adjourn or postpone voting on the CVA upon receipt of a late-in-the-day offer for the Caffè Nero group.

Any funder offering invoice finance facilities in the UK whose borrowers have (or may in the future have) debtors with a Scottish connection should be aware of the different rules applicable to invoice finance in Scotland.  

Scots law is less user-friendly to invoice financiers than English law, and the following is a brief, high level guide to some of the key issues to consider in invoice finance transactions which involve Scottish debts or debtors.

When is Scots law relevant?

At the end of September, Government protections that were designed to prevent a flood of insolvencies are set to be lifted. Specifically, the suspension of the provisions around wrongful trading will be over and creditors can once again seek to put companies who owe them money into liquidation. 

The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10 Regulations 2021) (the “Regulations”) will modify CIGA by extending certain restrictions on the use of winding up petitions, albeit on a more limited basis, in line with the tapering of government support measures introduced to combat the economic impact of COVID-19.

UK Government introduces a temporary increase to minimum debt level required for a winding up petition

Restrictions have been in place since the start of the pandemic to prevent creditors taking steps to wind up debtor companies. Those restrictions are due to expire on September 30, 2021. To lessen the risk of October seeing a mass rush by creditors seeking to wind up their debtors, the UK Government has introduced a further temporary measure in connection with liquidation petitions.

In this two part article we highlight for directors some of the main ways in which the general protection of limited liability does not apply or can be lost.

Part one of this article discusses those exceptions to the principle of limited liability that arise in insolvency or distress situations. Part two deals with the provisions that have more general applicability.

Breach of duties

Limited liability is one of the fundamental concepts in our understanding of company law. Even people who know very little about the working of limited companies may know that directors and shareholders are not liable for the debts of their companies. For the last 160 years, the protection of limited liability has been a key factor in economic growth and commercial activity as it has allowed entrepreneurs to speculate and take risks that they might not have been willing to do if the risk of personal liability overshadowed their decision-making.