Background

The High Court has considered the payment of business rates as expenses in new-style administrations. Business rates in respect of premises occupied by a company during the course of its administration are ‘necessary disbursements’ under rule 2.67(1)(f) and payable as expenses of the administration, as they are in a liquidation under rule 4.218(1)(m). Rates for unoccupied premises would also appear to be payable as administration expenses, although not as liquidation expenses.

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.

MF Global UK Limited In Special Administration

The Financial Services Authority (“FSA”) has confirmed that MF Global UK Limited (“MF Global UK”) has entered the Special Administration Regime created under the Investment Bank Special Administration Regulations 2011 (“Regulations”).¹ MF Global UK is the first investment bank to enter the Special Administration Regime. The decision to apply for special administration was initiated by the board of MF Global UK.

Introduction

The High Court1 in England has confirmed the validity under English law of contractual provisions common in structured finance transactions which subordinate payments to a swap counterparty in circumstances where the swap counterparty has defaulted on its obligations under the terms of the relevant swap agreement.

The Judgment

Parties

As COVID-19 related economic disruptions place unprecedented stress on cash flows, the risk of insolvency is a new and growing concern for many businesses. Against the backdrop of a decades-long growth in corporate debt, boards of directors are making decisions that have the potential for pitting the interests of creditors against the interests of equity shareholders.

Gowling WLG's finance litigation experts bring you the latest on the cases and issues affecting the lending industry.

Interests of bankrupt's creditors remain paramount

In Pickard and another (Joint Trustees in Bankruptcy of Constable) v Constable, the question before the court was how exceptional the circumstances had to be to postpone an order for possession and sale of a property in which the bankrupt had a 50% share.

"Leaving the mice in charge of the cheese..." is how one commentator described the now far from unusual phenomenon of the pre-pack administration sale. But what is meant by a "pre-pack"; are they lawful and what is the legitimate area for concern? While they were fairly uncommon in the past, pre-packs now seem to have become all the rage. Why? What scope is there for challenge or review if abuse is suspected?

What is a "pre-pack"?

This month we consider the court's refusal to imply an obligation into a loan agreement that a lender should take steps in foreign proceedings to preserve security; the court's view on the failure to heed alarm bells in relation to potential undue influence; and more cases and issues affecting the industry.

No implied term in a loan agreement that creditor should take steps in foreign proceedings to preserve security

Where the entirety of a debt is not included in an agreement to settle, a creditor can continue to prove in a bankruptcy for the balance.