The UK’s corporate governance regime has been stress-tested in the past decade and in many respects it has done well. However, in response to certain high profile corporate collapses which have caused heavy losses for creditors, in particular individuals and suppliers with little opportunity to protect themselves against losses, and in the spirit of continual improvement, the government has recently launched its “Insolvency and Corporate Governance Consultation”.
The consultation indicates that the government is considering changes in the law to address:
Key points
The High Court struck out a claim by a liquidator who had already brought a claim arising from the same facts against the same defendants.
The court relied on the fact that the economic benefit of pursuing the claim would accrue only to the liquidator.
The Facts
Key points
To attribute a director’s fraud to a company, the company must be a one-man company
A one-man company requires no innocent directors or shareholders
The Facts
Singularis Holdings Ltd (the “Company“) was set up to deal with the personal assets of Mr Al Sanea. Mr Sanea was at all the times the sole shareholder of the Company, though he was only one of a number of directors of the Company.
The facts
A liquidator pursued a claim against a former director of a company, that the transfer of the company’s trading inventory in satisfaction of money owed to the former director was a transaction at an undervalue and/or a preference.
An attempt was made to grant floating charge security over the inventory, which the court found was void as it was granted for existing liabilities, at a time when the company was insolvent, to a connected party.
Key points
Care should be taken to ensure that finance documents clearly and specifically set out the intention of the parties.
Lenders should ensure that charges created in security documents are not invalidated or altered by provisions of other finance documents.
Facts
Investors may, for reasons outside of their control, find themselves with a financially distressed company in their portfolio and possibly in unfamiliar territory. Consequently, it is not just those investors who actively seek out opportunities within the distressed space who should be mindful of the implications of insolvency processes (most commonly administration which can often also be used as part of a wider restructuring).
Key Points
Insurers had no priority rights to collect premiums over the proceeds of a successful action they had insured, as a result of a drafting error.
The High Court affirmed the general rule that, where a party has contracted for an unsecured right only, the court will not elevate it to a secured status.
The Facts
Key Points
A binding contract by exchange of email did not arise where parties were simply exploring a potential deal.
Sale by auction is often appropriate where an asset is difficult to value.
Where no differential treatment of creditors, unfair harm requires that a decision does not withstand logical analysis.
The Facts
Key Points
There is a low threshold for the granting of an injunction to prevent the presentation of a winding up petition.
The challenge against the debt in the statutory demand must be in good faith and have sufficient substance.
The Facts