Environment, social, and governance (ESG) are factors directors, investors, industries, and governments increasingly focus on when making commercial decisions. This is particularly so given increasing public awareness of such issues following recurrent environmental disasters and international summits such as COP26. Tim Symes and Ryan Hooton review the current regulatory environment in the UK, how it might bite on a company’s insolvency and when directors may find themselves personally liable for their actions.
Our recent updates have explained the rise in instances of fraud and the civil litigation options open to victims of fraudulent conduct.
The results of KPMG's Fraud Barometer showed a significant increase in fraud cases in 2021, confirming the general upward trend in this area. My colleagues recently prepared an update on the case of Hewlett Packard v Lynch, described as one of the most expensive and high profile fraud trials in recent history.
Often, clients contact us about debts due to them, with the expectation that a lengthy and expensive court action will have to take place before they have a chance of recovering those funds. However, in the right circumstances, there may be another option available.
Summary diligence is a peculiarity of the Scottish legal system. The term "summary diligence" is used to refer to enforcement of certain legal rights based on a document (for example, a lease) rather than a court decree. It can be a useful tool for creditors to avoid the courtroom.
Chris Corbin and Jeremy King, part owners of the company that owns the famous Wolseley restaurant had their company pushed into administration by its co-owner and major lender, having been in default since 2020, and now owes £38m. Administration might not have come as a surprise to anyone in that case.
However, directors and shareholders will not usually get anything like as much notice of a lender’s intention to appoint administrators and will frequently get none at all, as Insolvency and Asset Recovery Partner Tim Symes explains here.
It has taken over 20 months, but we now have a reported decision from the High Court in England on the operation of the new moratorium provisions introduced by the Corporate Insolvency and Governance Act 2020. Sir Alastair Norris, sitting as a High Court judge, has rejected a creditor's attempt to bring a moratorium to an end following a monitors' decision not to terminate the moratorium.
The changes to the director disqualification regime brought by the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 (the "Act") come into effect on 15 February 2022. We discuss the extension of disqualification proceedings and the impact on directors here.
The Changes
On 26 January 2022, the Covid recovery and Reform Bill (the "Bill") was introduced to the Scottish Parliament. The Bill followed a consultation exercise by the Scottish Government on the proposed changes to Scottish bankruptcy (known as sequestration). These proposed changes generated a good deal of interest with almost 3,000 responses being received from individuals and representative organisations.
With many businesses headed towards a ‘winter of discontent,’ dealing with a combination of the after effects of Covid19 related disruption, supply chain issues, soaring inflation and labour shortages, we are undoubtedly going to see a continued rise in insolvencies over the coming months which will emerge in many different and often unpredictable forms.
What could happen this winter?
In the context of debt recovery litigation, the obtaining of a decree (judgment) should not be an end in itself and this is particularly true in relation to volume debt recovery litigation. The purpose of a court decree is to enable the creditor obtain payment from his debtor of the sums of principal, interest and expenses (legal costs) due in terms of the decree.