According to the credit insurer, Euler Helmes, there were more insolvencies in construction than in any other sector during the first six months of 2011.
Where an insolvency affects consultants and contractors mid project then clients will be concerned about the possible ramifications for their projects. What are some of the key considerations for a client in this scenario.
The following question was published in the Financial Times on 23 July 2011 and answered by Richard Curtin, a lawyer in the London office of Faegre & Benson LLP.
I run a food and drinks company supplying products to football clubs. But we recently heard that one of the clubs we supply will probably go into liquidation very soon and we are concerned that we may not receive the money we're owed by it. Is there any action we can take now to make sure we are credited if and when the club becomes insolvent?
BNY Corporate Trustee Services Limited v Eurosail-UK 2007-3BL Plc & others [2011] EWCA Civ 227
The Court of Appeal has allowed companies around the country to breathe a solvent sigh of relief, as it has held that the so-called “balance sheet” test of insolvency in s123(2) Insolvency Act 1996 is intended to apply where a company has reached a “point of no return” rather than being used as a “mechanistic, even artificial, reason for permitting a creditor to present a petition to wind up a company”.
On 16 December 2010, HM Treasury published a revised draft of the Financial Markets and Insolvency (Settlement Finality and Financial Collateral Arrangements) (Amendment) Regulations 2010 (SI 2010/2993) (the “Amending Regulations”).
The court has held that a statutory demand is valid despite the high default interest rate on an underlying loan.
The administrators of St George’s Property Services (London) Ltd appealed from a decision granting the application of the 2 shareholders and directors of the company to remove the administrators and to appoint replacement insolvency practitioners who were willing to make an application under s 244 of the Insolvency Act 1986 (UK) in respect of an exorbitant credit transaction to which the company was a party.
In light of recent reports released to the market, a lender in the leveraged loan market would be forgiven for indulging in some cautious optimism. New-issuance in July aggregated to €9.5 billion - a 13-month high. The year-to-date leveraged buy-out volume of €10 billion (38 deals) compares favourably with the €2.2 billion of volume (13 deals) for the same period in 2009. Against this backdrop, however, lenders should consider the recently released statistics from the Insolvency Service, and other economic data, which suggest that the economic outlook remains uncertain.
On 1 May 2009, the administrators of Lehman Brothers International (Europe) ("LBIE") applied to the English High Court for directions on certain issues relating to "Client Money" (as defined in the UK Financial Services Authority's Client Assets Rules, the "CASS Rules") held by LBIE. LBIE was regulated by the FSA and was required to comply with the CASS Rules.
OFT is monitoring the lending and broking of secured loans to consumers where the loan's purpose is to annul a recent bankruptcy. It is asking for comments by 30 October from any consumers who have taken this type of loan.
The ready availability of credit over the first seven years of the past decade fuelled a massive, property-led consumer boom. Although perhaps a long time coming, the restriction in the continuing availability of such credit since mid 2007 has resulted in a serious recession. The scale of the problems will take time to unwind but given the continuing restrictions on credit, consumers are spending less, especially on high-value discretionary items.