In our “Insolvency in the fashion retail sector: the risks and opportunities” article in the Q2 edition of Global Insight, we looked at the challenges the fashion retail industry faces today and the opportunities available for both existing players and new market entrants in the context of insolvent business acquisitions. In this article we comment in more detail on these opportunities and consider some of the factors and risks to be aware of when purchasing an insolvent fashion retail business and its assets.

OPPORTUNITY ARISES OUT OF ADVERSITY

Directors of ‘can pay, won‘t pay’ award debtors face the prospect of an extended stay in England should they choose to defy a receivership order granted by the English Court in aid of enforcement.

Introduction

Key point

This case demonstrates how reservation of legal rights can be key even if the parties are seeking a commercial solution

Facts

Key Point

Subrogation operates not by assigning the benefit of the relevant third party's security but by creating new security rights in the hands of the subrogated creditor similar to those held by that third party.

Facts

Key Point

An administrator appointed under a qualifying floating charge can "adopt" an existing winding up petition for the purposes of liquidating the company where the benefit to the creditors of the insolvent estate is manifest on the facts.

Facts

Partnerships which are breaking up face a series of urgent problems – particularly where the business itself is becoming insolvent. These difficulties can be amplified by failing relationships between the partners (who have to work together to wind up the business) and the potential need to realise assets rapidly to stave off the appointment of liquidators.

Heads of Terms’ or ‘Memoranda of Agreement’ (“MoA”) are commonly agreed by parties as a precursor to entering into more substantial agreements.

MoA are often intended by the parties to be broad statement  of commercial intent to enter into a contract, rather than having contractual force themselves. Accordingly, MoA are often drafted with a more relaxed attitude towards their contents

However, no matter what the parties may have intended, a MoA can easily amount to a contract depending on its drafting, exposing the parties to unintended liabilities.

The PPF is going ahead with the new insolvency scoring system developed by Experian.

It is also raising its requirements for contingent asset guarantees.

New legislation came in to force on 21 July 2014 with the intention of granting entry to the Pension Protection Fund (the “PPF”) for those members of the Olympic Airlines SA Pension and Life Assurance Scheme (the “Scheme”). The members of the Scheme had previously been denied entry as a result of a Court of Appeal decision in the case of the Trustees of the Olympic Airlines SA Pension and Life Assurance Scheme v Olympic Airlines SA.

Phones 4u went into administration on 15 September 2014 following a decision by EE not to renew its contract. At the time of writing, all 560 stores and 160 concessions have been closed, pending a decision by the firm’s administrator whether to continue trading or break the company up in deals with, amongst others, EE and Vodafone.