The Insolvency Service has reported the first disqualifications under new legislation introduced to tackle the practice of directors dissolving companies in order to evade debts.
Reports last week of the significant increase in corporate insolvencies and voluntary liquidations in England and Wales for Q2 demonstrate the combined impact of government COVID-19 support being withdrawn, soaring energy and fuel costs, and weakening demand – and are being reflected in the nature of the instructions coming into our global jurisdictions from distressed companies across the globe.
The quarterly UK insolvency statistics (covering April to June 2022 inclusive) were released on 2 August 2022. They show that there has been an 81% rise in company insolvencies in England and Wales when compared with the same quarter in 2021, with the total number of company insolvencies in Q2 being the highest since Q3 2009. Significantly, creditors’ voluntary liquidations soared to 4,908, the highest number since the records started in 1960. The number of insolvencies look set to remain high for some time yet, given the difficult economic climate.
Having trouble reading this email? View it in your browser August 2022 SHARE THIS In this edition of Restructuring Watch, we reflect on: • The first restructuring plan to cram down HMRC. • Recent government reports on certain UK restructuring processes and learnings from the first six-months of the National Security and Investment Act 2021. • Government consultations on a crypto special administration regime and prospective additions to the cross-border recognition and insolvency framework. • A reminder of the recent important milestone in the Galapagos cross-border insolvency battle.
In Re Swiss Cottage [2022] EWHC 1495 (Ch), junior creditors argued that administrators appointed to two companies had exceeded their powers and breached their duties when selling two properties.
Background
In Stratford Hamilton (joint liquidator of Mobigo Ltd (in liquidation)) v James Mcateer, Teresa Delgaudio [2022] the court dismissed the directors' application to strike out misfeasance claims against them.
Background
The Insolvency Service's report on the impact of CVAs on commercial landlords, particularly in the retail and casual dining sector, follows concerns from landlords that compromises are unfairly affecting them. The research was based on 59 CVA proposals.
Key findings
On 22 July 2022, judgment was handed down in relation to the sanction of the first Part 26A restructuring plan to be proposed by a small–medium enterprise (SME) in Re Houst Limited [2022] EWHC 1941 (Ch). The restructuring plan (RP) procedure set out in Part 26A of the Companies Act 2006 (CA 2006) has been widely considered to be out of the reach of SMEs due to excessive cost. The decision is also an interesting one for other reasons, notably the cram-down of HMRC as a dissenting creditor.
Introduction
Section 819 of the Companies Act 2014 operates to restrict directors of insolvent companies from being appointed or acting as a director or secretary of a company and from being concerned in or taking part in the formation or promotion of a company. Any director who falls foul of s.819 is subject to a mandatory period of restriction of 5 years. The primary purpose of s. 819 is to protect the public from persons who, by their conduct, have proven themselves unfit to hold the office and discharge the duties of a director.
Anyone working in financial services will be aware of the requirement for individuals carrying out regulated roles to be "fit and proper". Clearly this is going to include solid personal finances and demonstrable honesty and integrity. The EAT decided that an estate agent who was dismissed because he became bankrupt and did not tell his employer was fairly dismissed.