Since the Transfer of Undertakings (Protection of Employment) Regulations 2006 were made in order to implement the European Union’s Council Directive 80/987/EEC, there has been an ongoing debate on how regulation 8 (7) (the bankruptcy proceedings exception) should be interpreted. Fortunately, a recent decision by the Employment Appeals Tribunal has gone some way towards clarifying the issue.

There are essentially three types of insolvency proceeding: liquidation, receivership and administration. Liquidators realise and distribute a company’s assets before dissolving the company. Receivers usually realise certain secured assets to repay certain debts, before appointing a liquidator. However, an administrator’s first objective is to rescue the company as a going concern. It is only if this is not practicable that the administrator can realise and distribute a company’s assets.

The Insolvency Service ("IS") has published a consultation on proposed reform to the regulation of insolvency practitioners. The consultation responds to various recommendations made last year by the Office of Fair Trading ("OFT") in their study entitled, "The Market for Corporate Insolvency Practitioners".

The much awaited EAT decision inOTG Ltd v Barke and others (formerlyOlds v Late Editions Ltd) was delivered on 16 February. As expected, the EAT has taken the view that an administration cannot amount to “bankruptcy” or “analogous insolvency proceedings” for the purposes of Regulation 8(7) of TUPE. So, on a sale by an administrator (even in a pre-pack administration) TUPE will apply.

In more detail

The full force of TUPE is relaxed in relation to insolvent transfers as follows:

The Insolvency Service has published its policy, which came into effect on 1 December 2010, on realising a bankrupt's principal residence where the Official Receiver (OR) is appointed as the trustee in bankruptcy.

The policy provides that the OR will not take any steps to market the bankrupt's interest in the property for a period of two years and three months from the date of the bankruptcy order. However, the OR can accept any unsolicited offer in relation to the property if it is in the best interest of creditors. After the expiry of the two years and three months:

A claim by trustees against an insolvent participating employer (who has ceased to participate in the pension scheme) for its share of the scheme deficit is a contingent obligation at the date of winding up and is admissible in the winding-up. This follows the decision by the Outer House of the Court of Session in Scotland in Burton, Re Direction of Assets [2010] CSOH 174.

The administrator who is running off the business of English (re)insurer GLOBAL General & Reinsurance Company Ltd filed a petition under Chapter 15 of the United States Bankruptcy Code with the federal bankruptcy court in Manhattan yesterday. The petition asks for the court's assistance with the last of four Schemes of Arrangement for GLOBAL, which was sanctioned by the High Court of Justice for England & Wales on January 28, 2011.

There are various routes by which a company may enter administration. The most common is an appointment by the directors. Alternatively, the holders of a qualifying floating charge may appoint or an application may be made to the court by one or more creditors.

The case of Hull v Campbell serves as a reminder of an outmoded debt recovery procedure that needs to be modernised.

Section 75 of the Pensions Act 1995 has the potential to mean that, as a result of corporate restructuring (including on employee and TUPE transfers), an employer that participates in a defined benefit occupational pension scheme could have to make a one-off payment (a debt) to the scheme. The debt reflects the difference between the scheme funds that are available and the estimated cost of securing all scheme benefits in the form of annuity policies.