The recent revelations about the Atherton Scheme, as reported by The Times, have left many in the legal and business communities surprised. Despite significant government efforts to clamp down on insolvency avoidance practices, this contentious scheme continues to operate, raising serious concerns about its impact on creditors and the integrity of the insolvency regime.
What is the Atherton Scheme?
North Brewing Company, a Leeds-based brewery and bar-owner, has secured a sale out of administration that will ensure their future trading, having become the latest to issue a notice of intention to appoint administrators earlier this month.
Specialist Restructuring Lawyer Comments On Latest Begbies Traynor Statistics
The high number of business failures revealed by today’s statistics released by Begbies Traynor can be attributed to the prevalence of 'zombie businesses', according to Andrew Walker, partner and Head of Restructuring and Insolvency at Irwin Mitchell.
As a partner in Irwin Mitchell's Restructuring & Insolvency team, I have witnessed the challenges that businesses in the UK are currently facing. The decline in consumer demand has left many companies scrambling to cut costs and find innovative ways to survive. Recent research conducted by BDO, the accountancy firm, reveals that 57% of medium-sized businesses in the UK see the drop in Britons' spending as one of their biggest hurdles over the next six months.
The latest statistics from UHY Hacker Young which reveal the financial difficulties faced by pubs and bars are disappointing and very concerning.
According to the national accountancy firm, insolvencies rose from 280 in 2020/21 to 512 as of the end of 2022. Given the perfect storm caused by rising inflation, the cost-of-living crisis, staff shortages and escalating salary costs, it perhaps isn’t too surprising. Nevertheless, corporate failure is not inevitable and businesses can do something about it.
As with many retail businesses, the Nero Group has been seriously impacted by the Covid-19 pandemic.
The company is the tenant of 619 stores and in November 2020 the directors proposed a Company Voluntary Arrangement, which is a statutory compromise voted on by creditors. The CVA proposal was principally focused on the company’s landlords, seeking to compromise the terms of the leases as to arrears of rent, future rent, service charges and insurance.
The creditors voted in favour of the CVA in December 2020.
The legal challenge (Carraway Guildford (Nominee A) Limited and Others v Regis UK Limited and Others, No. 8276 of 2018) by landlords against a retail company voluntary arrangement (CVA) was accepted by Mr Justice Zacaroli.
- Jurisdiction and unfair prejudice open to review on appeal
First instance decision
Landlords on 10th May lost their legal challenge at first instance against fashion retailer New Look’s use of a company voluntary arrangement (CVA) it put in place to help it restructure its business.
The landlords argued several points of challenge in their original application, most importantly from a legal and commercial perspective that CVA jurisdiction does not extend to complex, differential arrangements.
A balancing act
Creditors with legitimate grounds to challenge scheme or restructuring plan proposals and who assist the court in so doing should not be unduly discouraged by the costs regime. At the same time, frivolous arguments should not be supported with the promise of a costs award without consideration of party’s interests and other factors.
Virgin Active restructuring plans
On 7 February 2020 the Financial Conduct Authority (“FCA”), the Information Commissioner’s Office (“ICO”) and the Financial Services Compensation Scheme (“FSCS”) issued a joint statement warning FCA-authorised firms and insolvency practitioners to be responsible when dealing with personal data (the “Joint Statement”).