On Saturday 28 March, Secretary of State for the Business, Energy and Industrial Strategy, Alok Sharma, announced a proposal for the urgent reforms to UK insolvency law, designed to protect companies and their directors during the COVID-19 outbreak.

Wrongful Trading (section 214 Insolvency Act 1986)

It was announced that there would be a temporary suspension of section 214 Insolvency Act 1986 in relation to wrongful trading.

Sky News reports today that the Insolvency Service is considering reforms to insolvency laws which may include a moratorium on winding up petitions against companies and the suspension of rules on wrongful trading.

Construction litigation is no stranger to insolvency, including insolvent claimants. This is also the case for adjudication, a fast and commercially driven form of dispute resolution for the construction industry. However, there has been considerable uncertainty as to the enforceability of adjudicators’ awards where a claimant is insolvent and receives a favourable decision. Recent cases have shed some light on this issue and have started to untangle the statutory difficulties when insolvency meets adjudication.

A Members’ Voluntary Liquidation (“MVL”) is an efficient way to wind up a solvent company and release value to members. It is most often used where the directors wish to retire, the company has realised its potential or the company is dormant. By properly winding up the Company, the danger of the company being involuntarily struck off the Register of Companies and any resulting liability for the Directors is removed. A summary of the process is as follows:

Re System Building Services Group Limited [2020] EWHC 54 (Ch)

Summary

A recent High Court ruling has considered the character and extent of directors’ duties in the context of insolvency.

In System Building Services, Insolvency and Companies Court Judge Barber (“ICCJ Barber”) considered, amongst other things, the nature of a director’s duties to a company and whether those duties survive the company’s entry into an insolvency process.

It is almost 30 years since the commencement of the Companies (Amendment) Act 1990 (the “1990 Act”) which introduced the concept of Court protection for certain companies from their creditors to allow a formal restructure of a company’s debt. The examinership process is now governed by Part 10 of the Companies Act 2014 which mirrors the procedure provided for in the 1990 Act.   

Examinership process  

Introduction

Background

The Applicant, Mr Stephen Wallace was a UK based Liquidator of Carna Meats (UK) Limited (the “Company”). He claimed that his investigations into the Company’s affairs has been impeded by a lack of books and records. The Respondent, Mr George Wallace, was the Company’s former bookkeeper based in Ireland and was identified as holding all of the records of the Company. Despite a number requests from the Liquidator, Mr Wallace did not produce the documents.

Why are bankruptcy laws needed?

Over the past couple of years, there have been a wave of new insolvency and bankruptcy laws introduced in the GCC. With the exception of Qatar and Kuwait, all other GCC countries have now introduced new bankruptcy laws. As for Oman, its new bankruptcy law is due to come into effect on 1 July 2020.

The High Court recently considered an application by creditors for directions calling upon a liquidator to reconsider advice he had provided in a report to the ODCE and to carry out further and more forensic investigation into the circumstances which led to the liquidation of the company.

Background