Subject to exceptions, a director of a company that enters into liquidation is restricted from being involved in the management of a new or existing company (SecondCo) with the same or a sufficiently similar name to that of the liquidating company (section 216 Insolvency Act 1986 (IA 1986)). If in breach of s.216, a director will have personal liability for all the relevant debts SecondCo incurred during the period of the breach under s.217 IA 1986.

On 29 September 2021 the High Court dismissed a challenge to Caffè Nero’s 2020 CVA brought by one of its landlords, Ronald Young. Young asserted that the CVA was unfairly prejudicial and subject to material irregularities (thereby engaging both grounds of challenge under s.6 of the Insolvency Act 1986), and that the CVA nominees and company directors had breached their duties by failing to adjourn or postpone voting on the CVA upon receipt of a late-in-the-day offer for the Caffè Nero group.

The use of a company name which is the same or similar to the name of an insolvent company is fraught with complications. 

Were you at any stage involved in a company which went into liquidation or administration? Are you now involved in another business with the same or a similar name? If so, you could inadvertently have fallen foul of the criminal and civil liability under Section 216 of the Insolvency Act 1986. Joseph Miller explains the pitfalls of this complicated and often overlooked area of insolvency law.

While testators generally have freedom to decide how to dispose of their assets in England and Wales, there are limits to this freedom, including where a beneficiary of the estate is made bankrupt. If the testator passes away during the course of the beneficiary’s bankruptcy, the legacy will usually pass to the trustee in bankruptcy for the benefit of creditors instead of to the beneficiary.

Creditors can often confuse (i) the outlawed practice of “phoenixing” with (ii) pre-pack administrations. The former is an abuse of the privilege of limited liability through (often repeatedly) liquidating a company laden with debts only to emerge shortly after under the guise of a new limited company, debt free, effectively carrying on the exact same business with the same name, premises and people.

Death does not release an individual from their debts and liabilities, nor does it allow transactions made to loved ones to escape challenge. This is so regardless of whether the transactions were made with the intention to defraud creditors.

Insolvency administration orders (IAOs)

The Court of Appeal has overturned a decision of the High Court on whether immunity from suit, generally afforded to participants in court proceedings, extends to an examinee during an examination conducted under section 236 of the Insolvency Act 1986 ("Section 236").

This is the first article in 'Back to Basics', a series of articles looking at insolvency processes in Scotland. In this article I examine the court process for winding up a company.

A winding up petition is a form of legal action that can be used when a company is unable to pay its debts as they fall due. Sections 122 to 124 of the Insolvency Act 1986 (‘the Act’) deal with how to wind up a company in Scotland.

When is a company deemed unable to pay debts?

s.271(3) Insolvency Act 1986 provides that:

“The court may dismiss the petition if it is satisfied that the debtor is able to pay all his debts or is satisfied—

(a)that the debtor has made an offer to secure or compound for a debt in respect of which the petition is presented,

(b)that the acceptance of that offer would have required the dismissal of the petition, and

(c)that the offer has been unreasonably refused..”

OVERVIEW

Welcome to the second edition of the insolvency insight bulletin from the insolvency specialists at Quadrant Chambers. All cases link to the relevant judgments.

Case Law