With commentators predicting that the real impact of last summer’s credit crunch on corporate liquidations has yet to be felt, how can landlords and tenants of commercial properties prepare for a potential rise in the number of corporate insolvencies?

LANDLORDS’ REMEDIES - THINK OUTSIDE THE BOX

The landlord of a commercial property faced with an insolvent tenant will usually have two concerns:

In a judgment useful to insolvency practitioners, a court has recently confirmed that liquidators are not personally liable for payment of dividends. In Lomax Leisure v Miller and Bramston [2007] EWHC 2508 (Ch) Miller and Bramston faced personal claims on dividend cheques they had cancelled, after receiving a pending application from a creditor whose claim they had rejected. Miller and Bramstom were later replaced by a new liquidator who brought claims in the name of the company and various creditors.

The Polish metal tools manufacturer, Bison Bial (Bison), will be able to receive state aid amounting to €8.2m in order to enable the company to carry out a restructuring programme to improve the firm’s economic viability. After Bison entered into financial difficulties, Poland notified the European Commission that it wanted to provide aid to the company. The Commission decided that such aid was compatible with EU state aid rules, provided that the investment programme is fully implemented and the company sells one of its production divisions by the end of 2009.

The Accountancy Investigation & Disciplinary Board (AIDB) has launched an investigation into the conduct of certain members of professional accountancy bodies who were involved in the events leading to the collapse of European Home Retail plc and Farepak Food & Gifts Ltd which left 150,000 customers short of £40m in hamper savings.

The Powerhouse CVA, which sought to strip away guarantees provided by the parent company to landlords of Powerhouse, has been struck down as unfairly prejudicial by the High Court. However, certain aspects of the judgement remain unclear and could be subject to future appeal…

BACKGROUND TO THE POWERHOUSE CVA

Powerhouse (an electrical retailer) proposed a CVA on 1 February 2006 with the intention of closing 35 of its stores (the Closed Premises).

On 2 May 2007 the House of Lords ruled that the mere appointment of a receiver was not enough for a company to recover damages for business contracts that were allegedly lost as a result of that appointment.

The German Government is required by the European Commission ("Commission") to seek repayment of €5.2 million in aid from the bicycle group, Biria. The aid comprised two guarantees and “silent participation” (investor received remuneration but no shares) by a public investment company and the German Land of Saxony to subsidiaries within the Biria group. Although Germany argued that the “silent participation” was provided upon market conditions, the Commission did not accept that it met the private market investor test.