The Insolvency (Protection of Essential Supplies) Order 2015 which comes in to force on 1 October 2015 significantly changes the options available for suppliers of IT services in relation to their rights against insolvent customers. Any IT supplier caught within the definition of the new legislation will need to beware that they can no longer insist on payment of outstanding invoices as a condition of continued supply to an insolvent business, nor rely on clauses applying automatic price rises upon insolvency of the customer.

This article provides an essential update for insolvency practitioners on insolvency changes in 2015 and the proposed changes in 2016.

2015 Changes                

The Small Business, Enterprise and Employment Act 2015

As well as serving as a useful reminder of the law surrounding wrongful trading and the operation of section 214 Insolvency Act 1986, this recent High Court decision clarified where the burden of proof lies in defending a wrongful trading case.

Background

RE: HARVEST FINANCE LTD; JACKSON & ANOTHER V CANNONS LAW PRACTICE LLP & OTHERS [2014]

This case concerns the provision of documentation under s236 IA 1986. The documentation requested by the liquidators was extensive and the Respondents wished to claim their time costs (£40,381) of providing the same.  The Court held that whilst it was within the Court’s jurisdiction to make an order for costs against the insolvent estate, it was not minded to do so in this case.

The Facts

RE: BPE SOLICITORS & ANOTHER V GABRIEL [2015] UKSC 39 

The Supreme Court considered whether a trustee in bankruptcy who was considering adopting proceedings and lodging an appeal should be personally liable for historic adverse costs which had been awarded against the bankrupt prior to the commencement of the bankruptcy.

A Trustee in Bankruptcy’s liability for litigation costs

Introduction

The past three months have seen the publication of a spate of forthcoming regulatory and legislative changes. In this bulletin we investigate some of the more significant developments.

Insolvency Act 1986 (Amendment) Order 2015 – threshold for bankruptcy petitions

This order, which comes into effect on 1 October 2015, makes amendments to section 267(4) IA 1986, increasing the threshold for bankruptcy petitions to £5,000 (currently £750).

On 22 April 2015 the Supreme Court handed down its judgment in the case of Jetivia SA and another v Bilta (UK) Ltd (in liquidation) and others [2015] UKSC 23, which was heard in October last year.  In short it decided that: 1) defendant directors cannot raise illegality as a defence to a claim by a company where the directors themselves acted wrongfully; and 2) a claim in fraudulent trading under Section 213 of the Insolvency Act 1986 (Section 213)has extra-territorial effect.

Background

In addition to the general insolvency measures found in the Insolvency Act 1986, insurance intermediaries are subject to specific client money rules, which have a particular effect if they become insolvent. Though in the context of investment firms rather than the insurance sector, the recent UK Supreme Court case of Lehman Brothers International (Europe) (in administration) v CRC Credit Fund and ors [2012] UKSC 6 (LBIE) is a useful decision against which to consider the application of many of these client money rules.

The Supreme Court recently handed down its judgment in Jetivia SA and another v Bilta (UK) Ltd (in liquidation) and others [2015] UKSC 23. The Court was unanimous in dismissing the appellants’ case that the claimants’ claims against them should be struck out on the grounds of illegality and on the basis that section 213 of the Insolvency Act 1986 does not have extra-territorial effect.