Whenever there is an apparent monetary debt, common practice is for a claimant to threaten a winding up petition as part of the tactics to get a potential defendant to pay up. Three weeks after a statutory demand letter is sent where an apparent debt for £750 or more exists, a winding up petition can be issued against a company which has not paid (the actual financial wellbeing of the payer is irrelevant as long as they have not paid). Whenever an apparent debt is in dispute this can be a powerful tool to unsettle a defendant.
The context - validity of appointment of administrators
The appointment of administrators under a charge prevents a company’s directors from exercising any management powers without the administrator’s consent.
However, the charge must be enforceable at the time of the administrators’ appointment. What happens if the directors dispute that the charge was enforceable? Are they prevented from controlling the company to reject the appointment.
The background
On 24 July 2013, the Supreme Court handed down its long-awaited judgment in the Nortel/Lehman case on where a contribution notice (CN) or financial support direction (FSD) issued by the Pensions Regulator (TPR) on a company that is already in insolvency proceedings (eg administration) ranks in the order of priority of payment.
On 24 July 2013, in BESTrustees v Kaupthing, Singer & Friedlander [2013] EWHC 2407 (Ch) the High Court ruled in favour of an underfunded scheme, whose insolvent sponsor hoped to offset £2m in payments against its outstanding debt.
The High Court has confirmed that all rights relating to the control of data belonging to, or being controlled by, a company at the time it entered into liquidation remain vested in the company at and following its liquidation. Liquidators are therefore not personally liable for compliance with the Data Protection Act 1998 in respect of this data as they will be viewed as agents acting for the company rather than as 'data controllers'.
In his judgment handed down on 18 October1 Popplewell J took the opportunity to clarify the law
regarding payments by a company to third parties which may or may not have been suspicious and
where the company may or may not have been insolvent at the time. He looked long and hard at the
state of knowledge necessary to ground liability, at defences available to directors and whether the
court could relieve liability for innocent breaches.
Mr. Justice Popplewell recently dismissed the lawsuit filed by liquidators of Madoff Securities International Ltd after a lengthy trial in the High Court through which they were seeking to recover around $50 million. The ruling exonerated the UK defendants including former Bank Medici AG Chairwoman Sonja Kohn and the Directors of Bernard Madoff’s European organisation, including his children Mark and Andrew.
Several blogs ago, I asked whether a party could still argue that the Notified Sum (as defined in the Housing Grants Construction Regeneration Act 1996, as amended by the Local Democracy, Economic Development and Construction Act 2009 - the Act) was not payable even in the absence of a Pay Less Notice. To continue the theme of Pay Less Notices and their absence, what about the interplay between construction law and insolvency law - in the absence of a Pay Less Notice, and faced with a petition to the court to wind them up, could a party defend itself by saying that the so-called 'debt
According to The Times (25 October 2013) the British Property Federation has advised landlords to take larger rent deposits to reduce losses caused by the insolvency of a tenant.
Following insolvency, creditors and the (now insolvent) company can claim back losses from directors who breached their duties prior to the business breaking down. But it is not just formal directors – it is any individuals who actually control the company and have made themselves ‘shadow directors’ by doing so. In this way, creditors can recoup funds to meet the company’s debts from the individual directors who caused the loss of such funds.