Companies are under increasing pressure to examine their ESG policies, particularly after the recent COP26 conference. The UK's commitment to achieving net-zero emissions by 2050 has intensified the ESG focus.
What is ESG?
ESG, or Environmental, Social and Corporate Governance, is a term used to describe a set of standards that measures a business' environmental and social impact.
Why is ESG important in a distressed restructuring?
The recent judgment in City Gardens Ltd v DOK82 Ltd [2023] EWHC 1149 (Ch) serves as a useful reminder of the extent of, and principles governing, the English court’s jurisdiction to wind up a company on the basis of inability to pay its debts.
Background
City Gardens Limited (C), and DOK82 Ltd (D), had entered into a “memorandum of understanding” (MoU) in relation to a significant debt owed by D to C.
The latest insolvency figures for May show insolvencies continuing to increase, with construction and retail being among the hardest-hit sectors. Company voluntary liquidations continue to top the table, accounting for 85% of the total 2,552 insolvencies for the last month. Compulsory liquidations are also on the rise, particularly driven by HMRC. Small and micro businesses (with annual sales of less than £1m) account for around 99% of all liquidations, according to PWC.
The curiosity with claims based on transactions defrauding creditors is that a transaction can fall within its scope when a debtor is solvent and may never ultimately enter an insolvency process, and there is no requirement of fraud. Such claims fall under section 423 of the Insolvency Act 1986 (the act), and do require a debtor to have entered into a transaction at an undervalue (drawing on claims under section 238 and 339 of the act, in corporate and personal insolvency respectively) with the intention of putting assets beyond the reach of creditors.
Friday's Business section of The Times made interesting reading to us debt finance nerds.
ne in three of us own crypto currencies, crypto ownership is estimated to have doubled in the UK last year – and two of the world’s biggest crypto exchanges face lawsuits from the securities regulator, the SEC, in the US. Three statistics from the FT this week that put warnings from the UK’s financial regulator – that crypto is largely unregulated and high risk, and investors should be prepared to lose all their money – into context. The FCA noted that it is up to consumers to decide whether to buy crypto, but that many regret making a hasty decision.
The English tax authority, HMRC, has successfully challenged the restructuring plans put forward by The Great Annual Savings Company Limited (GAS) and Nasmyth Group Limited (Nasmyth).
This is the first time that HMRC has actively challenged restructuring plans at the sanction hearing. The key takeaways from the judgments:
Nasmyth
Background
The impact of the opening of insolvency proceedings on options granted in combined contracts (for example, a lease contract containing a call option for the leased real estate) had been in dispute for a long time.
Decision
The Austrian Supreme Court held that call options granted in lease contracts where the option fee has been paid do not expire with the opening of insolvency proceedings, nor are they subject to the right of the insolvency administrator to terminate the lease contract.
The German Federal Court of Justice (BGH) has ruled on the question of whether an agreement that grants release from a contract on grounds of insolvency or the opening of insolvency proceedings is effective.
Background
In the recent case of Re JD Group Ltd in liquidation; Bhatia v Purkiss (as liquidator of JD Group Ltd) a company director appealed a decision that he was liable for VAT fraud.
Background
Mr Bhatia was the sole director of a company trading in mobile phones. He was sent a HMRC notice explaining the risks of mobile phone trading and liability for involvement in VAT fraud.