Now everything will be better! The new ESUG legislation which entered into force on 1 March 2012 has generated huge expectations. The somewhat unwieldy title of “Law for the Further Facilitation of the Restructuring of Businesses” covers a raft of significant changes to the Insolvency Act and existing restructuring regulations. Its objectives are ambitious. The ESUG is intended to make business restructuring easier, more effective and faster – thus a press release from the Federal Ministry of Justice dated 23 February 2012.

In insolvency proceedings, claims for repayment of shareholder loans – particularly if granted to a company limited by shares or a limited commercial partnership – are generally subordinate. In its judgment of 15 November 2011 (II ZR 6/11), the Federal Court of Justice (Bundesgerichtshof, BGH) addressed whether and for what period this also applied to corresponding claims by former shareholders.

The Federal Court of Justice (Bundesgerichtshof, BGH) pronounced on double securities in its eagerly anticipated judgment of 1 December 2011 (IX ZR 11/11). The practice was controversial even before the Act for the Modernisation of Limited Liability Company Law and for the Prevention of Abuse (Gesetz zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen, MoMiG) came into force. “Double security” arises where security is provided over a creditor‘s claim both by the company itself and by its shareholders.

On 27 October 2011, the German parliament adopted the Law for Further Facilitation of the Restructuring of Businesses (Gesetz zur Erleichterung der Sanierung von Unternehmen, ESUG), which entered into force on 1 March 2012. In particular, legislators have increased the importance of debtequity swaps as part of this reform. Significant practical obstacles that previously often caused debt-equity transactions to fail have now been removed.

Previous legal framework

The Issue

With the depressing news that more than 20,000 Scots will go bust in 2012, and an average of 25 Scots firms a week will go under this year, it has never been more important to be alert to payment disputes.

The recent flurry of news reports regarding the administration of high street retail chains and the subsequent sale of parts of their businesses is perhaps an opportune time to flag up the renewed importance that the hypothec plays in Scottish property law.

By virtue of the hypothec, in insolvency, a landlord automatically obtains a fixed charge ranking on the proceeds of sale of the moveable goods of the tenant that are on the premises as at the point of insolvency, up to the value of any arrears of rent.

Agreements with administrators often contain provisions to the effect that any claim against the company in administration will rank only as an unsecured claim and not as an expense of the administration. Although such provisions are common, there has always been some doubt as to their efficacy.

Key2Law (Surrey) LLP -v- De' Antiquis [2011] EWCA Civ 1567

The Court of Appeal issued its long-awaited Judgment in the case of Key2Law (Surrey) LLP -v- De' Antiquis, confirming that businesses which are in administration are not exempted from TUPE.

The First-tier Tribunal has issued its decision in the case ofM Gilbert (t/a United Foods) v HMRC, one of the first cases concerning a claim for entrepreneurs' relief to reach the First-tier Tribunal. The Tribunal was asked to decide whether a taxpayer had disposed of part of his business or, as HMRC argued, simply sold some of the assets used to carry on the business.