A question facing many landlords is whether, when a tenant company faces insolvency and shows no intention of continuing to trade from the premises, they should take back the property and seek to relet it?
There are several key issues here, including:
- rates liability
- mitigating losses
- ability to recover from third parties and former tenants.
A landlord's decision has often turned on the type of insolvency faced by the tenant.
If a liquidator disclaims the lease:
Although service of a statutory demand or winding-up petition on a company is a blunt and unsophisticated debt recovery tool, it will often have the desired effect for a creditor as they are seldom ignored and ignored only at the company's peril. It can often prompt payment of the sum due, or judgment owed, where previously there has been prevarication and empty promises of payment.
Here is a reminder of some important issues a (solvent) company should consider if a statutory demand or petition is served upon it.
Doing nothing is not an option
The threat of insolvency proceedings against a corporate debtor can greatly assist a creditor's primary objective of getting paid, preferably in advance of everyone else. This is particularly so where the debtor is prevaricating but there is no genuine dispute that the sum in question is due and owing. Although the courts decry the use of the winding-up procedure as a means of debt collection, it is often a very effective tool.
Consider the following when faced with a corporate debtor who is refusing, without genuine reason, to settle its debts:
Pre-2006, it was always clear that TUPE applied to transfer employees working in a business when it was bought out of administration. However, changes in 2006 provided that the automatic transfer principle would not apply to any transfer of a business or undertaking where the transferor was the subject of bankruptcy proceedings, which had been 'instituted with a view to the liquidation of the assets of the transferor'.
This month the new Insolvency Rules 2016 came into force, replacing the Insolvency Rules 1986. We cover this, and other issues affecting professionals in the insolvency and fraud investigation industry below.
So long as there is no evidence of willful default or lack of reasonable diligence, failure to submit a claim form in time in relation to a CVA may not be fatal.
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
The credit crunch is biting ... your scheme's sponsoring employer is facing insolvency ... what can the trustees and advisors do before the insolvency to lay the foundations for a smooth Pension Protection Fund (PPF) assessment period?
What is a PPF assessment period?
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 defendant was the sole director of a company which went into liquidation. Almost six years after his appointment as liquidator, the claimant commenced proceedings seeking an order pursuant to s 212 Insolvency Act 1986 that the defendant contribute to the company’s assets on the basis that he had acted in breach of duty of care and skill and in breach of fiduciary duty owed to the company, which had resulted in the company’s deficiencies.