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.
On 8 April 2020, the Council of Ministers approved Law Decree no. 23, published in the Official Gazette (General Series no. 94, Extraordinary Edition of 8 April, 2020), containing “Urgent measures related to access to credit and tax obligations for businesses, special powers in strategic industry sectors, as well as healthcare and employment interventions, prorogation of administrative and procedural deadlines”.
With a recession appearing to be inevitable, for many companies innovation is more important than ever. Innovating and contracting in times of crisis requires caution, however, and contracts should as far as possible be insolvency-proof. Popular solutions include guarantees, sureties and retention of title. But it may be worth considering a lesser known option, the intercompany settlement clause, which works as follows.
Paying a debt to an insolvent company
The UK Government has announced wide-ranging emergency legislation in response to the Coronavirus crisis, in an attempt to reduce the burden on business and allow them to carry on trading during and after the pandemic. Some of the changes (other than the one on wrongful trading) were already intended following a consultation process that concluded in 2018 but are now being fast tracked.
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.