While every effort has been made to ensure the accuracy of the information contained in this booklet, it is only a summary and should not be relied upon as a substitute for detailed advice in individual cases.
Deacons 2020
Contents
Introduction Corporate insolvency
2 2
Available procedures
2
Liquidation
2
Members' voluntary liquidation
2
Creditors' voluntary liquidation
3
Compulsory liquidation
3
Which procedure?
3
Receivership
3
Scheme of arrangement3
As part of its response to the COVID-19 situation, Companies House has announced that it will accept the filing of statutory insolvency documents via emailed PDF attachments.
This measure applies to companies registered in Scotland, as well as England & Wales and is yet another practical example of the steps being taken to try and alleviate the administrative burden on insolvency practitioners.
It is perhaps not as well-known as it should be that the Bankruptcy (Scotland) Act 2016 sections 195 – 198 provides a six-week moratorium – effectively a postponement or period of protection from action to recover debts - to individuals, partnerships and trusts facing financial distress or liquidity issues.
The moratorium provides breathing space to allow parties to be protected from their creditors while they take advice and consider what debt relief options might be available to them.
A party can normally apply for the moratorium once in any 12-month period.
In recent years the Hong Kong Companies Court has dealt with a large number of applications for recognition and assistance from the Courts of various overseas jurisdictions in relation to cross border insolvency matters. The Court will now routinely grant orders of recognition and assistance to liquidators of companies incorporated in Commonwealth jurisdictions such as the Cayman Islands, Bermuda and the British Virgin Islands, which are all common law jurisdictions which have insolvency law regimes which are in many ways similar to Hong Kong’s own regime.
Insolvency in the construction industry is not just isolated to contractors, sub-contractors and consultants. Industry and economic pressures can affect all parties, including at times employers, therefore it is equally important for contractors to carry out due diligence when bidding for projects and to consider contractual mechanisms that can be put in place to protect against non-payment by the employer and insolvency risks.
Wrongful trading rules, which can result in directors being personally liable for losses incurred as a result of continued trading, are being temporarily suspended in recognition of the large number of businesses being impacted by COVID-19. While this news will be welcomed by businesses across the UK, directors should not be complacent about their responsibilities.
For many years an insolvent company’s creditors have had their cake and eaten it where a gratuitous alienation for inadequate consideration has been successfully challenged.
Back in the late 1990’s the ubiquitous Katie Price t/a Jordan was at the height of her fame, gracing the pages of our tabloids, gentlemen’s publications such as Loaded and FHM and perhaps the odd bedroom wall of a rather poor Law student. It was reported at the time she had a net worth of around £45million.
In December 2018 with her finances now somewhat diminished, Katie entered into an Individual Voluntary Arrangement (“IVA”) with her creditors. In November this year she was made bankrupt for failing to comply with the same.
This update explains the key changes in cross-border insolvency proceedings if the UK leaves the EU without a deal on 31 October 2019 (or at a later date). Importantly, a no-deal exit will impact how and where such insolvency proceedings can be raised in a post-Brexit future.
A bit of background
While the UK is still an EU Member State, EU Regulations provide a clear framework for conducting cross-border insolvency proceedings. The EU Insolvency Regulations (the 2000 Insolvency Regulation and the 2015 Recast Insolvency Regulation) include provisions which: