Key points
- The High Court has ruled that, where a tenant goes into administration, rent which is payable in advance and falls due before the commencement of the administration is not recoverable by the landlord as an administration expense
- Landlords must take their place with other unsecured creditors in relation to sums payable before the appointment of administrators, even if they relate to a period during which the administrators had use of the property
Background
In our Law-Now of 4 April 2012 (click here for link), we reported on the decision of the court in the case of Leisure (Norwich) II Limited v Luminar Lava Ignite Limited (in administration). The detailed judgment has now been released, setting out the rationale for the decision and summarising the position on rents in administration generally.
The legal position on this issue is now:
With the number of retail administrations up 15% in the first quarter of 2012 compared to a year ago (according to research by Deloitte), the recent High Court case of Leisure (Norwich) II Limited v Luminar Lava Ignite Limited (in administration) 28 March 2012 will be of particular interest to landlords. They will not be pleased with the decision that unpaid rent which falls due prior to the appointment of an administrator/liquidator amounts to an unsecured claim against the insolvent tenant. It is not to be treated as an expense of the administration/liquidation (and w
It is looking increasingly likely that 2012 will be another difficult year for the automotive sector, leading to a decline, not only in vehicle sales, but also in goods and services supplied to the sector. As a result, businesses may experience cash flow problems and increased creditor pressure to pay invoices.
The Insolvency Service has recently published a helpful guide about the restrictions on the re-use of a name previously used by a company, which has gone into liquidation. Directors of companies in insolvent liquidation need to take special care, as the restriction applies to them personally and contravention is a criminal offence. The restriction lasts for five years from the date of liquidation and, save in limited circumstances, a director is not allowed to be a director of or take part in the promotion, formation or management of a limited company that uses a "prohibited name".
In the current economic climate, brokers will find the decision of the High Court in Euroption Strategic Fund Limited v Skandinaviska Enskilda Banker AB[2012] EWHC 584 (Comm) of considerable interest, since it considers the duties of a broker who is conducting a close out and liquidating the position of a client who is in a state of default, in this case for failure to meet margin requirements.
The Court ruled that:
In Rhinegold Publishing Ltd v Apex Business Development Ltd, Rhinegold and another company owed debts to the defendant in the sums of approximately £22,000 and £31,000 respectively. The defendant presented a winding-up petition against both companies which resulted in settlement being reached. The settlement provided that the companies would pay off the debts owed in full by monthly payments and that no proceedings would be issued in relation to the debts referred to in the original statutory demand if payment was made.
The TUPE Regulations contain some provisions designed to make struggling businesses more attractive to prospective purchasers. TUPE will not apply to transfer employees, and dismissals will not be automatically unfair, where insolvency proceedings have been instituted with a view to liquidation of assets (Regulation 8(7)). However, TUPE will apply to insolvency proceedings which do not aim to liquidate assets, and employees will have unfair dismissal protection (Regulation 8(8)).
The Court of Appeal has issued further guidance on the thorny issue of the application of the TUPE Regulations to administration proceedings. While many practitioners will feel that the decisions are not helpful in trying to achieve business sales in what is already a challenging market, insolvency practitioners (IPs) nonetheless need to be aware of the clarity that these cases have brought. The key points to note are: