Repossession of a bankrupt's property will be ordered unless there are exceptional circumstances making such an order inappropriate.

In Brittain v Haghighat, the only asset in the bankrupt's estate was the family home. One of the bankrupt's children was severely disabled with quadriplegic cerebral palsy, requiring continuous care. The trustee applied for an order for possession under s336 and s337 Insolvency Act 1986.

Pensions and insolvency legislation uses the test in the Insolvency Act 1986 for assessing whether a person is ‘connected’ or ‘associated’ with another. This test is important because various statutory provisions use it, especially in limiting the persons whom the Pensions Regulator can make responsible for pension scheme deficits under the ‘moral hazard’ powers in the Pensions Act 2004. This briefing gives an outline of the statutory provisions and points to some difficult areas.  

Why is this relevant?  

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.

On 1 April 2008 The Non-Domestic Rating (Unoccupied Property) (England) Regulations 2008 (Regulations) came into force. The Regulations extend the exclusion from the obligation to pay rates in respect of unoccupied non-domestic rates to those premises where the owner (or lessee, being a person entitled to possession) is a company in administration pursuant to Schedule B1 Insolvency Act 1986 or is subject to an administration order under the former administration provisions.

One of the significant changes to distributions in insolvency made by the Enterprise Act 2002 was the abolition of the preferential status of debts owed to the Crown and the introduction of a provision for the creation of a ‘ring-fenced fund’ (also known as the “prescribed part”, an amount currently capped at £600,000) from the proceeds of floating charges created after 15 September 2003 to be applied in distribution to unsecured creditors.

Philip Bell v Philip Long, Andrew Thomson, PKF and Weatherall Green & Smith (North) Limited [2008] EWHC 1273 (Ch)

Background

The receiver's duty to exercise care in disposing of the company's assets and to ensure he obtains the best price reasonably obtainable at the time of sale was considered recently in the English case of Bell v Long & Others.

It is clear from the recent collapse of Bear Stearns that the real impact of the credit crunch is now being felt. With this in mind, how can landlords and tenants of commercial properties prepare themselves for a potential rise in the number of corporate insolvencies?

Landlords’ remedies – think outside the box

The landlord of a commercial property faced with an insolvent tenant will usually have two concerns:

Secured creditors with an unsecured shortfall cannot claim a share of the prescribed part of the floating charge realisations set aside for unsecured creditors under Section 176A of the Insolvency Act 1986. This applies whether the secured creditor is the holder of a fixed or a floating charge (or both).

The retail sector and its suppliers operate at the sharp end of the economy and feel the impact of tighter consumer spending with more immediacy than most other sectors.

Summary