The Employment Appeal Tribunal (“EAT”), in the case of Secretary of State for Business, Innovation and Skills v McDonagh, has had to consider what the “appropriate date” is for the purposes of employees claiming arrears of salary and holiday pay from the National Insurance Fund, in circumstances where a voluntary insolvency procedure is followed by a compulsory insolvency procedure.

Overturning the High Court and Court of Appeal decisions in Bloom and Others v The Pensions Regulator and Others, the Supreme Court has ruled that financial support directions (FSD)and contribution notices (CN) issued by The Pensions Regulator in insolvencies create “provable debts” which should be given unsecured, non-preferential, creditor ranking.

The insolvency of one or other of the parties to a dispute has become commonplace in recent times, particularly in construction related disputes. Practitioners are becoming increasingly knowledgeable about the implications of insolvency on procedure and the potential remedies available.

We recently reported on the Court of Session's decision that a liquidator of a company being wound up in Scotland may abandon both heritable property and statutory licences. A full copy of that article can be accessed here.

The Court has now issued its written decision. This provides further analysis and confirms the position that we previously reported.

Parties represented

The Court of Session has held that a liquidator of a company being wound up in Scotland may abandon both heritable property and statutory licences. Affected creditors will have the right to submit a claim in the liquidation process. In the absence of that creditor holding security, the claim will rank as an unsecured claim.

Background

Eastman Kodak is in the process of emerging from Chapter 11 bankruptcy in the United States. A key part of the process has been the settlement of the $2.8 billion claim by Eastman Kodak’s UK subsidiary pension fund, the Kodak Pension Plan. This has involved the sale of 2 businesses to the Kodak Pension Plan for a total of $325 million in return for a discharge from liability to the Plan. These businesses were valued at $650 million.

Government bonds were long considered a safe investment that offered the potential for high returns. However, after Argentina announced in 2002 that it would no longer service its bond debt and after Greece restructured its sovereign debt in March and December 2012, the question arises as to what investors can do to avoid the significant losses of capital (up to 70% in case of Argentina and over 80% in case of Greece) which almost always accompany sovereign debt restructurings.

The Federal Court of Justice (BGH) continued with its extensive interpretation of the rules for contesting transactions under insolvency law in a judgment dated 21 February 2013 (BGH IX ZR 32/12). In the case before the court, direct shareholder A in company T sold a claim under a loan to B at below par value. Following assignment, T repaid the loan to B at the nominal amount plus interest. Insolvency proceedings were opened around two months later in relation to T’s assets. The BGH’s decision covers three aspects:

A. Bill of the “Law on shielding credit institutions and financial groups against risks and planning their restructuring and winding-up”

In a recent case decided by the Federal Court of Justice (judgment of 15 November 2012 – IX ZR 169 / 11), an energy supplier had entered into a contract with a customer “which should also terminate without notice if the customer makes an application for insolvency or where preliminary insolvency proceedings are initiated or opened based on an application by a creditor”. When the customer was forced to declare insolvency, the energy supplier and the customer’s insolvency administrator entered into a new energy-supply contract at higher rates, subject to a review of the legal position.