Lending to a foreign company? If you choose English law to govern your facility documents and provide for the English court to have exclusive jurisdiction, an English scheme may be a viable means of restructuring the debt later, if the need arises.

In the recent English Court of Appeal case of Rubin v Coote, the court allowed a liquidator to settle litigation without having obtained the agreement of all creditors to the compromise.

The Facts

Release provisions

The scope of the powers afforded to the security agent by the so called “release provisions” found in many intercreditor agreements employed in LBO deals has come under scrutiny recently. A number of restructurings have relied upon using the security agent’s powers to implement a restructuring and many others will have at least considered using them.

In January we posted on the impact of a case that ruled that landlords are able to claim rent as an expense of the administration when a tenant’s administrators are in occupation of all or part of a leasehold property.

The Limitation Act 1980 prescribes various periods of time in which a claim must be brought. In the event that this is not undertaken within the specified period, the cause of action will be statute barred and as such unenforceable.

In the case of a simple contract, the period is six years and in general begins to run from the date on which the cause of action accrued. In order to 'stop the clock', proceedings (a claim) will have to be brought.

The Insolvency Service issued a consultation paper in July 2010 on proposals for a restructuring moratorium.

This follows a previous consultation paper titled Encouraging Company Rescue, issued in June 2009, which outlined three proposals:

Under Part 26 of the Companies Act 2006, it is open to a solvent company to enter into an arrangement or compromise with its creditors or members. Over the past 10-15 years such solvent schemes have been implemented in M&A and restructuring transactions and have proved increasingly popular in the insurance market, permitting insurers to crystallise their contingent liabilities.

Background

Over the past year the Courts in Scotland have been tightening up their procedures in relation to the granting of extensions in administration. This note sets out the various issues that have arisen and considers the best ways to ensure that applications of this type proceed without unnecessary costs.

A decision by the High Court in December has strengthened the position of landlords who sometimes do not get paid during the administration even where the administrator is running the business from the property.

Certain categories of expense which may be incurred by the company after it has gone into administration, and which an administrator has to pay are known as "expenses of the administration" and the assets of the company in administration must be applied towards payment of these expenses ahead of any payment to creditors under floating charges or to unsecured creditors.

1. Can I lock the tenant out of the property until they pay?

No. If a tenant has been placed in administration then there will be a moratorium in place. This gives a company some breathing space. Rights against the company, such as forfeiture or conducting legal proceedings, can only be pursued with either the consent of the administrator or a court order. As noted last week, changing the locks is likely to forfeit the lease. Unless you intend to forfeit and obtain the necessary permission to do so, you should not change the locks.