In Masri v Consolidated Contractors (Oil and Gas) Company SAL – Butterworths Law Direct 6.2.09 a receivership order had been made, paragraph 15 of which stated that 'Nothing in this order shall, in respect of assets located outside England and Wales, require the defendants and/or their directors to disobey the order of any court of competent jurisdiction in relation to such assets'.

Many landlords are experiencing the difficulties caused by tenants going into administration. Often their administrators seem to ignore landlords’ interests and lease terms when putting pre-packs together and many let the buyers of the insolvent business into the premises under informal licence arrangements, putting the landlord entirely at the administrators’ mercy when it comes to the payment of rents. If they’re lucky, administrators will offer to pay rent on a monthly basis in arrears.  

Company Voluntary Arrangements or CVA’s

Mead sought to enforce an adjudicator's decision of £332k. Dartmoor resisted on the basis that, as Mead was subject to a CVA, a stay should be granted on any judgment otherwise awarded to Mead. Mr Justice Coulson refused. There was no previous authority dealing with the point, but the Judge decided the following principles were relevant:  

Historically, the United Kingdom has not had a specialised bankruptcy regime for dealing with the failures of financial institutions. Rather, these were handled under the same rules that applied to ordinary corporations.

Repossession of a bankrupt's property will be ordered unless there are exceptional circumstances making such an order inappropriate.

In Brittain v Haghighat, the only asset in the bankrupt's estate was the family home. One of the bankrupt's children was severely disabled with quadriplegic cerebral palsy, requiring continuous care. The trustee applied for an order for possession under s336 and s337 Insolvency Act 1986.

Pensions and insolvency legislation uses the test in the Insolvency Act 1986 for assessing whether a person is ‘connected’ or ‘associated’ with another. This test is important because various statutory provisions use it, especially in limiting the persons whom the Pensions Regulator can make responsible for pension scheme deficits under the ‘moral hazard’ powers in the Pensions Act 2004. This briefing gives an outline of the statutory provisions and points to some difficult areas.  

Why is this relevant?  

Introduction

This Note deals with the potential liabilities under English Law of the directors and officers (secretary and managers) of a UK company in the event of its (potential) insolvency.  

Summary  

Directors - and, to a lesser extent, other officers of a company - face a number of areas of potential personal liability. Of most relevance is the liability of the directors for ‘wrongful trading’.  

The following is a broad overview of the duties and liabilities of directors when their company is in financial difficulties. It is a general guide only and there will be variations according to the specific laws in each jurisdiction.  

Pre-2006, it was always clear that TUPE applied to transfer employees working in a business when it was bought out of administration. However, changes in 2006 provided that the automatic transfer principle would not apply to any transfer of a business or undertaking where the transferor was the subject of bankruptcy proceedings, which had been 'instituted with a view to the liquidation of the assets of the transferor'.

The threat of insolvency proceedings against a corporate debtor can greatly assist a creditor's primary objective of getting paid, preferably in advance of everyone else. This is particularly so where the debtor is prevaricating but there is no genuine dispute that the sum in question is due and owing. Although the courts decry the use of the winding-up procedure as a means of debt collection, it is often a very effective tool.

Consider the following when faced with a corporate debtor who is refusing, without genuine reason, to settle its debts: