Before embarking on any litigation, or continuing any litigation that is on foot at the time of the liquidator's appointment, a liquidator should carefully weigh up the benefits and risks of pursuing a particular course of action.
A liquidator can be exposed personally in litigation. We discuss the risks to a liquidator associated with litigation by examining some recent cases where liquidators have been ordered to pay costs personally. We provide guidance on ways to mitigate this risk.
Balancing risk – weighing up competing priorities
During the pandemic, the UK Government has put legislative measures in place to protect commercial tenants by preventing landlords from using certain remedies such as forfeiture and winding up petitions. However, the legislation does not specifically prevent a landlord from issuing debt claims against its tenants for arrears of rent and other amounts due under a lease (see the recent case of Commerz Real Investmentgesellschaft mbh v TFS Stores Limited [2021] EWHC 863 (Ch)).
Externally-administered companies will have 24 months to comply with financial reporting and AGM obligations, if ASIC's proposal goes ahead.
ASIC relief defers obligations to lodge financial reports and hold annual general meetings for companies in external administration by 6 months. Companies in liquidation (other than AFS licensees) do not have to comply with financial reporting or AGM obligations at all.
Unless the Article 50 period is extended yet again, the UK is currently set to leave the EU on 31 October 2019 at 11pm GMT. However, if the Withdrawal Agreement is ratified, the impact of Brexit will, for most purposes, be postponed due to the transition period. This transition period is currently set to end on 31 December 2020. The Withdrawal Agreement provides that during transition, the UK would continue to be treated as if it were still an EU member for the purposes of a range of directly application EU legislation which is core to the smooth running of financial transactions.
This page was updated on 8 January 2021.
Companies post-restructuring are not subject to the rules protecting creditors of insolvent companies in section 588FL of the Corporations Act 2001.
From 1 December 2020 new changes to the priority rules in insolvency will have a real impact on the recoveries achieved by secured creditors on the insolvency of a debtor. These new rules give HMRC priority above floating charge holders and ordinary unsecured creditors in relation to tax collected by an insolvent company from third parties, such as VAT, PAYE income tax and NICs.
There remain a number of issues in the proposed insolvency reforms that need careful deliberation, particularly where the Regulations have yet to be released for consideration.
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