In BNY Corporate Trustee Services Limited v Eurosail–UK 2007–3BL Plc and others, the Court of Appeal ruled on the interpretation of the so-called "balance-sheet" test of insolvency under section 123(2) of the Insolvency Act 1986. This is essentially that a company is deemed unable to pay its debts if the value of its assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities. This appears to be the first reported case on the interpretation of the balance-sheet test of insolvency.

A CVA was introduced as one of the rescue arrangements under the Insolvency Act 1986. It allows a company to settle unsecured debts by paying only a proportion of the amount owed, or to vary the terms on which it pays its unsecured creditors. Whilst a CVA only requires approval of a 75% majority of the creditors by value, it binds every unsecured creditor of the company, including any that voted against it or did not vote at all.

In Rubin v Coote [2011] EWCA Civ 106 (09 February 2011) the Court of Appeal has upheld the decision of a liquidator to settle litigation against a former director of a company notwithstanding the opposition of the company’s creditors.

In BNY Corporate Trustee Service v Eurosail UK1, the Court of Appeal rejected a “mechanical” definition of balance sheet insolvency.

Background

Section 123 of the Insolvency Act 1986 provides two main tests of when a company is insolvent:

Background

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.

In this case, a liquidator had commenced proceedings against the former director of a company in relation to transactions which were alleged to have been made at an undervalue and/or with an intention to defraud creditors and/or which were preferential. It was also alleged that the former director had acted in breach of his fiduciary duties in procuring or permitting the transactions to take place.

A recent Supreme Court judgement has confirmed that where an individual, Mr X, acts as director of company A, and company A is the sole director of company B, that will not necessarily make Mr X a “de facto” director of company B.

The Court decided that the mere fact of acting as a director of a corporate director was not enough to render the individual a de-facto director, “something more” would be required, such as the director holding himself out in correspondence as a director of company B.

OTG v Barke1 is the most recent judgement by the employment appeal tribunal (EAT) on whether the Transfer of Undertakings (Protection of Employment)  Regulations 2006 (known as 'TUPE') apply to sales by companies in administration under schedule B1 to the Insolvency Act 1986.