It seems that business disruption due to coronavirus is pretty inevitable. What should you as a company director be doing if the disruption means your business starts to suffer?
What changes for me as a director?
As a director, you know that you owe duties to the company. When the business starts heading towards insolvency, there is a change of emphasis and instead of doing what is best for the shareholders, you have to change and consider what the consequences of your actions will be for the company’s creditors.
The UK Parliament made an Order on 3 March 2020 which increases the prescribed part, payable to unsecured creditors from floating charge recoveries on the insolvency of a company from £600,000 to £800,000.
Back in August 2018, in its paper entitled “Government Response: Insolvency and Corporate Governance” (the 2018Paper) the Government responded to its consultation on ‘Insolvency and Corporate Governance‘ with the announcement of several reforms and proposed next steps.
The UK Parliament made an Order on 3 March 2020 which increases the prescribed part, payable to unsecured creditors from floating charge recoveries on the insolvency of a company from £600,000 to £800,000.
Back in August 2018, in its paper entitled “Government Response: Insolvency and Corporate Governance” (the 2018 Paper) the Government responded to its consultation on ‘Insolvency and Corporate Governance' with the announcement of several reforms and proposed next steps.
Last September we reported on the Court’s decision on the landlords’ challenge to the Debenhams CVA on grounds of unfair prejudice and material irregularity, in respect of which the landlords have now successfully obtained permission to appeal on various grounds (see below).
A recent English case has considered for the first time whether and if so to what extent the general duties of a director survive a company’s entry into an insolvency process.
Entrepreneurs’ Relief – review and reform
Entrepreneurs that sell their businesses have been able to take advantage of Entrepreneurs’ Relief since 2008. It currently allows individuals to pay only 10% Capital Gains Tax on all gains on the sale of qualifying assets up to a lifetime allowance of £10m.
The Conservative Manifesto said that ER would be subject to “review and reform”. There is increasing speculation that changes will be introduced at the Budget in March.
The recent case of 365 Business Finance Ltd v Bellagio Hospitality WB Ltd is a reminder of the need to act quickly when enforcing a Judgment.
Insolvency in the construction industry is not just isolated to contractors, sub-contractors and consultants. Industry and economic pressures can affect all parties, including at times employers, therefore it is equally important for contractors to carry out due diligence when bidding for projects and to consider contractual mechanisms that can be put in place to protect against non-payment by the employer and insolvency risks.
Construction litigation is no stranger to insolvency, including insolvent claimants. This is also the case for adjudication, a fast and commercially driven form of dispute resolution for the construction industry. However, there has been considerable uncertainty as to the enforceability of adjudicators’ awards where a claimant is insolvent and receives a favourable decision. Recent cases have shed some light on this issue and have started to untangle the statutory difficulties when insolvency meets adjudication.
Summary and Key Takeaways