In the wake of the Carillion insolvency and the Toys R Us administration, there are contrasting tales from two different UK businesses.
The engineering business Rolls-Royce is going against the trend and has announced that it will keep its defined benefits pension scheme open for current members until January 2024.
The scheme is running at a £1.4 billion surplus, which will also allow the company to decrease its contributions to its defined benefit retirement fund by £145 million over the next three years.
At the start of 2017, UK businesses had reported a 33% risk of insolvency, compared to the end of 2017 which saw that figure increase to nearly 40%.
These figures were calculated by drawing together key performance indicators including balance sheets and records of the directors’ successful (or unsuccessful) directorship history.
Commonly, a creditor being sued by a liquidator to refund an alleged unfair preference is owed money by the company in liquidation.
Liquidators argue that under section 553(c)(1) of the Corporations Act 2001 (Act) a creditor is not able to set-off the outstanding indebtedness owed by the company to the creditor to reduce any liability of the creditor to refund any unfair preference. Similar arguments are made by liquidators in relation to insolvent trading claims.
A snapshot of the court decisions
What happens if a debtor is made bankrupt after a creditor has issued debt recovery proceedings?
A bankruptcy debt is any debt that the bankrupt owed to the relevant creditor at the date of the bankruptcy order, or a debt which arises under an obligation incurred by the debtor before the bankruptcy order, but one which falls due after the date of the bankruptcy order (known as contingent debts).
The Insolvency Service has just released its personal insolvency statistics for 2017 revealing an upturn in overall personal insolvencies (just under 10% more than in 2016) and an increase of around 1/5th (19.8% on 2016) of people entering into Individual Insolvency Arrangements (IVAs). More people entered into IVAs last year than in 2008 (when many consider the credit crunch took its grip).
In light of the business news over the last year, including the most current news of Carillion, it is important to know how business failure impacts on employment rights.
Despite the Treasury’s comparison of independent forecasts for the UK economy showing an overall upturn for January 2018, there appears to be a nasty outbreak of bad weather looming. Close on the heels of the reported financial woes of Toys R Us and House of Fraser comes the news of the fashion retailer New Look and now, massively, Carillion.
The recent decision in Leeds v Lemos may create significant problems for Trustees in Bankruptcy as they attempt to fulfil their duty of realising a Bankrupt’s estate for the benefit of his creditors.
The case centred on the wish of the Trustee in Bankruptcy to rely on documents that the Bankrupt (and some third parties) claimed were privileged. The Trustee in Bankruptcy therefore asked the Court to compel the Bankrupt to waive privilege, so that the documents could be referred to in legal proceedings..
When creditors are demanding payment and money is tight the easiest thing to do is pay those who are shouting the loudest. Often HMRC debts, including Winding Up Petitions, are ignored in favour of paying suppliers so that a business can keep going. However, ignoring HMRC can lead to unavoidable failure of a company.
On 11 September 2017, the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill 2017 was passed by the Senate. The Bill features two key changes to the Corporations Act: