OTG v Barke is the latest case from the Employment Appeal Tribunal (EAT) to consider how the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) apply in the context of the sale of a business in administration. The case largely resolves the uncertainty in that context and affirms the general practice of administrators and purchasers of businesses from them.

Administrators will note with concern the decision of the East London Employment Tribunal in Spencer v Lehman Brothers (in administration) and Others, which suggests that administrators can be held to be personally liable for the discrimination of employees of the business in administration.

Clauses common in syndicated facility agreements were considered and construed in favour of the majority lenders:

-- Strategic Value Master Fund Ltd v Ideal Standard International Acquisition S.A.R.L. (England, High Court, 4 February 2011)

This case involved an examination of clauses common to syndicated facility agreements. The agreement here was based on the LMA standard.

In another case involving administrators, an employment tribunal somewhat controversially has held that the individual administrators could be liable as principals in an agency relationship with employees of a company in administration.

In our December 2010 insolvency update, we reported on the UK High Court's decision in BNY Corporate Trustee Services Limited v Eurosail.

In the recent case of BNY Corporate v Eurosail[1], the Court of Appeal for the first time considered how the 'balance sheet' test of corporate insolvency in section 123(2) Insolvency Act 1986 (IA 1986) should be applied.

Section 123(2) IA 1986 provides:-

'A company is also deemed unable to pay its debts if it is proved to the satisfaction of the court that the value of the company's assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.'

The Court of Appeal has confirmed the High Court's decision that the "Balance Sheet Test" (for whether a company is unable to pay its debts under Section 123(2) of the Insolvency Act 1986) cannot be reduced to a single formula or set of principles that apply to all companies.

The Balance Sheet Test forms part of the provisions that regulate when a company may be compulsorily wound up by the Court.

In BNY Corporate Trustee Services Ltd v Eurosail UK 2007 - 3BL PLC & Ors, the English Court of Appeal has decided that the mere fact that a company’s aggregate liabilities exceed its assets may not render the company to be deemed unable to pay its debts under section 123(2) of the UK Insolvency Act 1986 (commonly referred to as the “balance sheet test”). The test is whether a company has reached a point of no return such that its state of affairs is not or is unlikely to continue having regard to its contingent and future liabilities.

With effect from 6 April 2011, the London Insolvency District (General London County Court) Order 2011 gives the Central London County Court jurisdiction over bankruptcy cases where the bankrupt resides, or carries on business, in the London insolvency district. The High Court used to have jurisdiction over all London's bankruptcy cases.

The EAT has held that employees of a business will transfer to the buyer of that business, even where the business is in administration, as long as there has been a 'relevant transfer'.