The draft Legislative Reform (Insolvency) (Miscellaneous Provisions) Order 2009 has now been published detailing the proposed changes to the Insolvency Act 1986. The aim of the changes is to reduce costs and the administrative burden on users of the legislation and subsequently benefi t the creditors of insolvent companies and individuals through more fl exible procedures and increased dividends.  

In the current climate, both landlords and tenants could be forgiven for wondering what would happen if the other became a victim of the recession. For both parties, a rent deposit deed can provide some comfort. Such a deed would mean the landlord has immediate access to cold hard cash if the tenant fails to pay the rent, while a struggling tenant may get valuable breathing space before the landlord turns to other remedies.  

The Employment Appeals Tribunal (EAT) has decided that the sale of a business by way of a pre-pack administration[1] did not result in a transfer of employees under the Transfer of Undertakings (Protection of Employment) Regulations 2006, (TUPE Regulations or TUPE).

TUPE Regulations

Introduction

This Note deals with the potential liabilities under English Law of the directors and officers (secretary and managers) of a UK company in the event of its (potential) insolvency.  

Summary  

Directors - and, to a lesser extent, other officers of a company - face a number of areas of potential personal liability. Of most relevance is the liability of the directors for ‘wrongful trading’.  

The priorities of some pension claims on bankruptcy and receivership changed as a result of amendments effective July 8, 2008 to the Bankruptcy and Insolvency Act R.S.C. (Canada) (the “BIA”).  

Priority Before the Amendments

The decision of the Ontario Court of Appeal earlier this year in Slater Steel* exposed 10 directors, officers and employees to possible personal liability of $20 million with no meaningful recourse against the insolvent Slater Steel or its assets. This is a reminder that failure to recognize and fulfill fiduciary obligations for a pension plan can expose you to substantial personal liability.

The European High Yield Association's proposals for reforming the UK insolvency laws risk pushing the UK towards the US litigation-heavy model says Reynolds Porter Chamberlain LLP, the City law firm.

In proposals submitted to HM Treasury, the trade body for the high yield debt industry called for a "court supervised restructuring process" where:

One pioneer in this area is Toby Duthie, the founder-director of Forensic Risk Alliance, a forensic accounting and investigations business. Duthie became familiar with the US litigation system while assisting European companies responding to US-based litigation. Duthie recognised that there were many differences between the US and the various EU legal systems. For example, unlike in the UK, the application of contingency fees to plaintiff actions is permissible in the US (see above).

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 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.