Angel Group Ltd and others concerned a group of companies in Administration where the director asserted that the companies’ bank had “conspired to artificially distress the business”

The facts

In the case of Angel Group Ltd and others [2015] EWHC 3624, Administrators from KPMG were appointed to Angel Group Limited and to seven of its subsidiaries. The Bank of Scotland was the only secured creditor, and was owed a residual balance of £20 million.

KEY POINTS

With the cyclical fluctuation in oil and gas commodity prices, the UKCS has had its fair share of E&P companies going insolvent. As the UKCS matures, the profile of companies that invest in the region is changing. Many smaller parties, potentially with less access to capital, are now building positions.  The commercial exposure is that some companies will not be able to meet cash calls, creating headaches for their co-venturers.

Key Point

The High Court has given some guidance on the effect of an order to restore a dissolved company to the register where a secured creditor has rights against that company and there has been a disclaimer by the Crown.

Facts

This article was first published on Lexis®PSL on 15 November 2018.

Crumpler and another (Joint liquidators of Peak Hotels and Resorts Ltd in liquidation) v Candey Ltd, [2018] EWCA Civ 2256, [2018] All ER (D) 78 (Oct).

What are the practical implications of this case for practitioners?

The UK government announced on 26 August 2018 that it will legislate to change aspects of the UK restructuring and insolvency systems. The reforms are a response to recent high-profile domestic corporate insolvencies and the various issues highlighted in those matters.

In this recent judgment, the court considered the extent of an administrator's duties and when an administrator could be considered an agent to a secured lender.

The issues considered by the Court

The court explored the nature of the administrator's duties in relation to the conduct of the administration, the decision of which selling agents to appoint and the sale of the secured asset.

Attachment of earnings - money is paid directly from the judgment debtor’s wages/salary into court by the debtor’s employer to satisfy the judgment debt.

Bankruptcy proceedings - you can currently apply to make an individual judgment debtor bankrupt for a judgment debt in excess of £5,000. The limit is £500 for applying to put a company into liquidation. The nuclear options.

Administrators can be validly appointed to a company by the holder of a floating charge which was given by the company in breach of a negative pledge in favour of an existing secured creditor and even if, both at the time of the purported creation of that floating charge and on the day of the purported appointment of administrators, the company had no assets which were the subject of the floating charge.

A defined hierarchy of creditors exists when a company enters insolvency, with secured creditors being at the top, and first in line for payment once the Insolvency Practitioner’s fees have been met. Unsecured creditors, on the other hand, rank near the bottom of the list.

A secured creditor is generally a bank or other asset-based lender that holds a fixed or floating charge over a business asset or assets. When a business becomes insolvent, sale of the specific asset over which security is held provides repayment for this category of creditor.