The UK generally distinguishes between “loan relationship” debts (e.g. loan receivables) and other debts (e.g. trading debt in respect of outstanding consideration for the sale of goods or services). It is possible to turn a trading debt into a loan relationship by issue of a debenture in respect of it.

Tax treatment in the hands of the creditor

The Pensions Regulator (the Regulator) recently used its powers under the Pensions Act 1995 to appoint an independent trustee to the exclusion of all other trustees of the scheme. The employer was required to pay the fees and expenses relating to the appointment.

The Regulator decided to use its powers because:

Many landlords are experiencing the difficulties caused by tenants going into administration. Often their administrators seem to ignore landlords’ interests and lease terms when putting pre-packs together and many let the buyers of the insolvent business into the premises under informal licence arrangements, putting the landlord entirely at the administrators’ mercy when it comes to the payment of rents. If they’re lucky, administrators will offer to pay rent on a monthly basis in arrears.  

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.

With administrations and liquidations on the rise, companies may well-find that they occupy premises under a sub-lease where their immediate landlord has become insolvent and we look at their rights and how the position differs north and south of the border.

With the economy in poor shape and personal debt still at high levels, the outlook is less than rosy for people who are facing insolvency. Even after the changes made by the Enterprise Act 2002, bankruptcy is still a difficult experience. This is especially true where the family home is the main asset of the bankrupt’s estate.

The trustee in bankruptcy will normally seek a possession order over the property so that it can be sold to satisfy the claims of creditors.

When deciding whether the possession order is to be granted, the court is obliged to consider:

This memorandum provides an overview of the practical issues facing a sub-participant under a Loan Market Association ("LMA") English-law governed sub-participation agreement as the creditworthiness of grantor deteriorates.

The court will not assist a former bankrupt to enforce his interests under an unlawful trust where the purpose of the trust initially had been to deprive the trustee in bankruptcy of the bankrupt's interest.

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.

The recent downturn in the economy is undoubtedly having an adverse effect on the cash flows of a large number of businesses in the UK. Businesses are keeping a much closer eye on outgoings and expenses, and may be looking to ease financial pressure by making payments due to creditors as late as possible.

For a business operating from leased premises, quarterly rental payments are likely to be one of the biggest outgoings. The longer the rental payment remains in the tenant's bank account, the more interest they will accrue and the more likely that cash flow issues will be eased.