Following the Insolvency Service’s announcement that it will produce monthly (as opposed to quarterly) company and individual statistics for England and Wales, to assist the Government and the insolvency sector in monitoring the impact of COVID­19, the results for July showed that:

The Department for Business, Energy & Industrial Strategy (BEIS) has recently issued a press release regarding proposed changes in the law to better protect consumers in the event that a company, and in particular a retailer, becomes insolvent.

Under existing law, if a company becomes insolvent but goods pre­paid for are still in its possession, they may be considered as assets belonging to the business and can be used by administrators to pay off the company’s debts.

The Finance Act 2020 received Royal Assent on 22 July confirming the Government’s intention to restore HM Revenue & Customs (HMRC) as a secondary preferential creditor in insolvencies. From  1 December 2020, HMRC’s claims for unpaid employer NIC, PAYE and VAT will rank ahead of floating charge holder claims and unsecured creditors, reducing the monies available for  distribution to lower ranking creditors.

This judgment provides some guidance in relation to the scope and application of s283A IA86,  which gives a bankrupt’s trustee in bankruptcy three years to take the necessary steps to realise or secure the bankrupt’s interest in the bankrupt’s home failing which that interest will cease to be part of the estate and will automatically re­vest in the bankrupt.

In this case the court was concerned with the meaning of the phrases (a) ‘an interest in’, (b) ‘a dwelling­house’ and (c) ‘sole or principal residence’ under s283A(1).

Shandong Chenming Paper Holdings Limited v Arjowiggins HKK 2 Limited CACV 158/2017 (date of judgment 5 August 2020)¹

Introduction

What does the Corporate Insolvency and Governance Act 2020 (CIGA) do?

CIGA introduces various changes to various provisions of the Insolvency Act 1986 and the Companies Act 2006.

Some of these changes are designed to be permanent changes to the insolvency landscape (largely implementing proposals for insolvency law reform introduced in 2018) – for example, the introduction of a moratorium, a ban on termination provisions (also known as ipso facto clauses) and a new pre-insolvency rescue and restructuring regime.

CIGA 2020 which received the Royal Assent on 25 June 2020 has introduced several significant changes to UK insolvency legislation. Some of these are temporary measures enacted in response to the Coronavirus pandemic to mitigate the effects of the lockdown. Others, however, are permanent measures that result from a consultation process to amend the Insolvency Act 1986 begun in 2016 and concluded in 2018.

In this case the court considered a debtor’s application to set aside a bankruptcy order made in her absence (due to self-isolation in accordance with Covid-19 guidelines). It was held that the fact that the debtor was bankrupt meant she had no standing to apply to set the order aside. The court accepted that the debtor had a good reason not to attend court, and had acted promptly to set the order aside, however legal precedent going back to the 1990’s meant that only a trustee in bankruptcy could challenge the liability orders. 

This case was heard before CIGA came into force but the provisions of the CIG Bill were known. Statutory demands were served on 27 March 2020 on the company in respect of debts due under loan agreements and a winding up petition had been presented. The company applied for an injunction to restrain the advertisement of the petition, claiming that although it was insolvent it had been prevented from obtaining funding, to enable it to propose a scheme of arrangement to its unsecured creditors, as a result of the pandemic.

The joint liquidators of a company, which had been compulsorily wound up in England and Wales, sought orders under section 236 of the Insolvency Act 1986 (“IA86”) for production of documents and an account of dealings with the company, in respect of companies in Italy. The question for the Court was whether s236 IA86 had extraterritorial effect. The problem for the court was that there was competing first instance decisions both for and against.