Corporate Debt Restructuring through a Company Voluntary Agreement

In the current economic climate most businesses will experience temporary or longer term cash flow pressure resulting in stressful trading and creditor pressure.

On 7 September 2010 "property and environmental services giant" Connaught, which had large contracts with many local authorities for maintenance of social housing, went into administration. In the wave of publicity which followed, the administrator quickly announced that it had "sold" the "majority of the ongoing contracts and their related assets" to Lovell, a subsidiary of Morgan Sindall. Since then, announcements have been few and far between.

By a judgment handed down on 26 October 2010 in Sugar Hut Group Ltd & Ors v Great Lakes Reinsurance (UK) Plc & Ors [2010] EWHC 2636 (Comm), Mr Justice Burton in the Commercial Court held that insurers were entitled to avoid, for a material non-disclosure of a corporate re-organisation, a policy which could otherwise have covered losses arising from a fire at the premises of the insureds.

On 17 September, the Pension Regulator's Determinations Panel announced that it had issued a determination that six companies within the Lehman Brothers group (including the group's main operating companies in the UK as well as the US parent Lehman Brothers Holding Inc.) should provide financial support to the Lehman Brothers Pension Scheme. This followed a hearing on 8-9 September 2010.

Why has the Financial Support Direction (FSD) been issued?

The PPF policy statement can be found here

Following its November 2009 consultation, the PPF has published a statement confirming its policy on measuring insolvency risk for the 2011/12 levy. Schemes and employers should act quickly before the 30 and 31 March 2010 deadlines.

The policy statement confirms that for the 2011/12 levy year, the PPF will adopt new policies, including:

In September 2009 we reported on the first instance decision in Butters and ors v BBC Worldwide Ltd and ors, accessible here in which the Court held that contractual provisions in a joint venture agreement taken together with termination provisions in a licence of IP rights were void since the effect of those provisions on insolvency was to deprive creditors' access to assets and therefore contrary

On 9 November, the PPF published proposals for the 2011/12 pension protection levy year which aim to improve the way the insolvency risk for sponsoring employers is assessed. The proposals reflect industry feedback and a review of methodology and insolvency probabilities carried out by Dun & Bradstreet (D&B).

The key changes include:

In its previous decision in April the First Tier Tribunal upheld the cross border group relief claims which Marks & Spencer made in respect of its Belgium and German subsidiaries after the subsidiaries had commenced liquidation. The Tribunal held further that, whereas the utilisation of the losses was to be determined by reference to local rules, the unutilised losses had to be re-computed according to UK principles for the purposes of determining the amounts which could be group relieved.

In Butters and ors v BBC Worldwide Ltd and ors, decided on 20 August 2009, the Court held that contractual provisions in a joint venture agreement taken together with termination provisions in a licence of IP rights were void since the effect of those provisions on insolvency was to deprive creditors access to assets and therefore contrary to public policy in the light of insolvency laws.

BUSINESS IMPACT