Pre-pack sales continue to attract attention and create controversy. A pre-pack occurs when a deal is agreed for the sale of the business and assets of a struggling company prior to formal insolvency proceedings being instigated. The purchase is effected upon the appointment of the insolvency practitioner and the purchaser is very often a vehicle in which the directors/shareholders have a stake.
Today, the U.K. Treasury announced that it “has taken decisive action to protect the interests of retail depositors and wider financial stability” by placing London Scottish Bank plc in administration.
The insolvency legislation has laid the foundations for a rescue approach towards companies, which are facing insolvency. One such regime is administration. The administrator is sometimes referred to as the "company doctor". The administrator is given extensive powers to administer the affairs of the company in order to save the company from being wound up or at least, to maximise the financial position for the company's creditors.
With the economy in poor shape and personal debt still at high levels, the outlook is less than rosy for people who are facing insolvency. Even after the changes made by the Enterprise Act 2002, bankruptcy is still a difficult experience. This is especially true where the family home is the main asset of the bankrupt’s estate.
The trustee in bankruptcy will normally seek a possession order over the property so that it can be sold to satisfy the claims of creditors.
When deciding whether the possession order is to be granted, the court is obliged to consider:
In Oakland v Wellswood (Yorkshire) Ltd, the Employment Appeals Tribunal (EAT) decided that an employee of a business in administration was unable to have the protection afforded to employees under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) when the business in which he was employed was transferred and continued as a going concern with the transferee.
Introduction
Following the administration proceedings recently instituted against a number of UK entities (Affected Companies), many counterparties (Counterparties) may wish to terminate transactions under the TBMA/ISMA Global Master Repurchase Agreement (GMRA) entered into between them and Affected Companies.
In the case of Andrew Fender v National Westminster Bank PLC Judge Purle QC set aside a deed of release that had been executed in the mistaken belief that the company was no longer indebted to the bank.
The Employment Appeal Tribunal (EAT) has held, in Da Silva Junior v Composite Mouldings and Design Limited, that continuity of employment was preserved where an employee of a company in voluntary liquidation was subsequently employed by a company with the same majority shareholder.
In the current economic climate, there are a number of key issues facing borrowers in the event of lender insolvency or default.
Committed facilities/term loans
Provided they are fully drawn and the borrower is not in breach itself, the impact in the short term may not be too severe.
In the current market turmoil, several banking and insurance names have already had to be rescued by government-brokered packages. It is therefore timely to review what rights institutional investors have in the event of counterparty insolvency. Unfortunately, the picture is complicated, not just because the question of how pension fund investors can get their money back may have an international dimension, but also because governments keep moving the goalposts on the availability and adequacy of compensation schemes.
Where does the claim arise?