The Facts

On 31 July 2012, a bankruptcy order was made in respect of Mr Dean Jonathan D’Eye on the basis of a statutory demand dated 11 July 2011.

During their investigations, his trustees in bankruptcy discovered that Mr D’Eye had made a payment of £321,919 to his father on 24 January 2012 (the Payment) and, after the presentation of the bankruptcy petition on 28 May 2012, a significant portion of this money had then been used to purchase a flat (the Flat).

Much like the English Scheme of Arrangement which has become a popular debt restructuring solution for international debtors, the English High Court is an attractive forum for insolvency litigation thanks to the potent combination of wide-ranging powers available to Insolvency Practitioners (IPs) under the Insolvency Act 1986, and the increasing availability of litigation funding arrangements in the London market.

Does section 127 of the Insolvency Act 1986 void payments made by the insolvent company’s bank after the presentation of a winding-up petition but pursuant to payment instructions issued by the company before presentation of the petition?

Varden Nuttal Ltd v Michelle Louise Baker (2016)

It was decided that a bankruptcy order should have been made in circumstances where the debtor had misled the creditors when agreeing and entering into an Individual Voluntary Arrangement (“IVA”).

Background

Directors can be held liable to contribute to company assets if they knew or ought to have known at a point before the commencement of administration or insolvency that there was no reasonable prospect that the company would avoid this process. This is known as wrongful trading (section 214 of the Insolvency Act).

As we reach the 30th anniversary of the Insolvency Act 1986, the legislators have clearly decided it is time to dust the profession down and bring out a shiny new model for us to hop aboard and take a journey (for some) into the unknown.

But what do all these changes mean in practice, and is there any theme running through them?

Fee regime

OTL was placed into compulsory liquidation. Prior to this it transferred monies to a trust located in HK of which N was perceived to be the principal trustee. The OR as liquidator applied for an order under s 236(3) of the Insolvency Act 1986 (IA 1986) that N produce a witness statement with supporting documents in relation to the company’s affairs. The primary question for HHJ Hodge QC was whether s 236(3) of the IA 1986 could have extra-territorial effect as N was resident in HK.

Held

In my recent article with respect to individuals applying for bankruptcy online, dated 4 April 2016, I reported that the Insolvency Service must be vigilant with respect to abuse. In particular, it is a debtor’s duty is to provide the Official Receiver or Trustee with details of all known assets. Failing to do this is an offence, under Section 354(1) of the Insolvency Act 1986 (IA 1986).

Following on from our recent blog post on Ralls Builders Limited (in liquidation) [2016] EWHC 243 (Ch), in which Mr Justice Snowdon discussed the issues around wrongful trading under section 214 of the Insolvency Act 1986 and the quantum of liability that may be placed on directors who continue to trade when they knew, or ought to have known, that the company was insolvent, the Financial Reporting Council (“FRC”) has issued new guidance on the going concern basis of accounting and reporting on solvency and liquidity risks.

Introduction

Generally, directors are focused on making a success of the business to which they are appointed and the prospect of insolvency and the potential for personal liability often seems remote. Indeed, many directors will never have to face the difficult decisions associated with a struggling business. However, when they do, they often rely on the advice of experienced insolvency professionals.