Recent weeks have seen a number of decisions concerning liquidations – in this article we explore three of the more interesting ones.

1)  Overseas application of s.213 - Jetivia SA and another v Bilta (UK) Ltd (in liquidation) and others [2015] UKSC 23

The past three months have seen the publication of a spate of forthcoming regulatory and legislative changes. In this bulletin we investigate some of the more significant developments.

Insolvency Act 1986 (Amendment) Order 2015 – threshold for bankruptcy petitions

This order, which comes into effect on 1 October 2015, makes amendments to section 267(4) IA 1986, increasing the threshold for bankruptcy petitions to £5,000 (currently £750).

In family law property settlement proceedings, if a spouse is declared bankrupt, the trustee in bankruptcy may join the proceedings in an effort to recover funds from the property pool to pay the bankrupt’s creditors.

While in theory this approach sounds sensible, it may not always be prudent for a trustee in bankruptcy to seek to be joined or consent to being joined. In particular, recent trends suggest that trustees are being very cautious about getting involved in proceedings between a bankrupt and their spouse.

The involvement of a trustee in bankruptcy

The Supreme Court has confirmed in Jetivia v Bilta that where a company brings a claim against its directors for losses caused by their wrongdoing, the directors cannot escape the claim by arguing that their actions are attributed to the company itself.

The Supreme Court also held that s.213 of the Insolvency Act, (which permits the Court to take action against those who  have conducted the business of a company in order to defraud creditors) was not jurisdictionally confined and applied to people and companies resident outside the UK.

Employees who transfer to a new employer from a business that is under insolvency proceedings may be able to recover unpaid wages and other debts from the Secretary of State.

However, BIS v Dobrucki has confirmed that the Secretary of State will only pick up the liabilities of the old employer (the transferor).  It will not be responsible for liabilities that are incurred after the transfer has taken place; that is, any liability of the new employer (the transferee).

The background

The 18 March saw George Osborne’s budget speech, heralded by Mr Osborne announcing that “Britain is walking tall again” and promising to “use whatever additional resources we have to get the deficit and the debt falling”. We examine what the drivers behind the hyperbole might mean for the insolvency community.

Further austerity as the key theme

This quarter has seen a wave of legislative and regulatory reform on the way. We review some of the more significant developments.

Insolvency exemption to the Jackson reforms extended indefinitely

In Allco Funds Management Limited v Trust Co (Re Services) Ltd [2014] NSWSC 1251, an inter-company loan transaction was challenged by a receiver appointed by the secured creditor to one of the companies. Common directors were involved in the transaction. The issue was whether the directors breached their fiduciary duties entitling the company via the receiver to have the transaction set aside.

The background to the case

A debtor company can seek to have a statutory demand set aside if there is a genuine dispute as to the existence or amount of the debt, or the company has an offsetting claim.

Because the threshold for contesting a statutory demand is relatively low, a creditor may decide it is better to issue the statutory demand for the undisputed portion of the total debt after making an appropriate allowance for the amount of the total debt in dispute or the amount of the alleged offsetting claim.

When a company is facing short term financial difficulties the directors or shareholders may decide to make a loan to the company to pay wages.