The changes
Since 29 December 1986, the Insolvency Act 1986, as amended by 23 subsequent statutory instruments, has governed the way in which insolvency practitioners, lawyers, creditors, debtors and others dealing with insolvency issues, have addressed procedures such as bankruptcy, administration, liquidation and voluntary liquidation.
In Crystal Palace FC Ltd v Kavanagh & Ors [2013] EWCA Civ 1410, the Court of Appeal considered whether dismissals made by an administrator to keep a business alive with the ultimate aim of selling it were automatically unfair under TUPE, in which case liability would pass to the buyer.
Comment
According to The Times (25 October 2013) the British Property Federation has advised landlords to take larger rent deposits to reduce losses caused by the insolvency of a tenant.
Following insolvency, creditors and the (now insolvent) company can claim back losses from directors who breached their duties prior to the business breaking down. But it is not just formal directors – it is any individuals who actually control the company and have made themselves ‘shadow directors’ by doing so. In this way, creditors can recoup funds to meet the company’s debts from the individual directors who caused the loss of such funds.
Even someone castaway on a tropical island (say Curacao) will have heard of the Young divorce case which has been played out in the international press. The financial hearing starts today and is expected to last for 4 weeks. In one corner is Scot Young who was worth £400m in 2006 but says that his finances took a sharp downturn and led to his bankruptcy in 2010. In the other corner is his estranged wife who has been trying for many years to uncover a true picture of her husband’s financial circumstances.
The English Court has devised a new route to impose liability on a company's UBO who strips assets from the company leaving creditors to claim in its insolvency. UBOs feeling comfortable about the security of their corporate veil after the Supreme Court’s decision in Prest[1], will need to look carefully at this recent decision, which may be applied in other jurisdictions with corporate laws based on English law, such as BVI and Cyprus.
The Court of Appeal’s ruling in Neumans LLP v Andrew Andronikou & Ors [2013] EWCA Civ 916 has provided some useful guidance to insolvency practitioners on the courts’ approach to administration and liquidation expenses.
Pre-match warm up
On 17 September, TPR updated its trustee toolkit to include a new learning module: ‘Winding up a DB scheme, insolvent employer: wind-up or transfer to PPF’. The module, now available to download, covers DB scheme closures where the employer is insolvent.
An updated Statement of Insolvency Practice (SIP) relating to pre-packaged sales in administrations has been issued by the Joint Insolvency Committee, effective from 1 November 2013. The new SIP aims to provide greater clarity for creditors, with insolvency practitioners (IPs) having to provide earlier notification of the pre-packaged sale and more detail as to the circumstances surrounding, and terms of, the sale transaction.