At the end of last year judgment was handed down by Pat Treacy J in a matter notable for the unusual attitudes of a director towards the company’s director’s loan account. By the time the company entered into administration, the loan account was overdrawn to the tune of £1.35m, with the director having withdrawn funds to (amongst other things) finance the purchase and maintenance of a personal yacht.

For those of you hoping this article would be about chess or the wonderful Netflix drama of the same name, you will be sadly disappointed. If you came here for insolvency news then keep reading. This article will focus on Her Majesty’s Revenue and Custom’s (HMRC’s) “gambit” to gain an advantage over other creditors through the return of the “crown preference” from 1 December 2020. This article explores what HMRC’s status as a secondary preferential creditor means and its implications for insolvency practitioners and others going forward.

In measures that came into effect from 1 December 2020, the Finance Act 2020 dictates that for certain debts, HM Revenue & Customs (HMRC) will now rank much further up the chain of creditors when a company enters administration or liquidation. This is a radical change to a process that had previously ranked HMRC as an unsecured creditor for nearly 20 years.

What was the old system?

Introduction

In R (on the application of KBR, Inc) (Appellant) v Director of the Serious Fraud Office (Respondent) [2021] UKSC 2¹ the Supreme Court held that the Serious Fraud Office ("SFO") may not compel a foreign company to produce documents held overseas under section 2(3) of the Criminal Justice Act 1987 ("CJA 1987").

The case of Re NMUL Realisations Limited (in administration) [2021] EWHC 94 (Ch) follows in the footsteps of the case of Re Tokenhouse VB Limited [2020] EWHC 3171 (Ch),where the Court considered whether a charge-holder’s failure to give notice of their intention to appoint administrators invalidates the appointment (see our previous blog here).

Summary

In Uralkali v Rowley and another [2020] EWHC 3442 (Ch), the High Court has confirmed the position in relation to the duties that officeholders owe to third parties involved in the sale process of a business and assets out of an insolvent estate.

PJSC Uralkali v Rowley & Anor [2020] EWHC 3442 (Ch) is about the sale of the Force India F1 racing team, owned and operated by Force India Formula One Team Limited (the “Company”).

The Force India F1 team was more successful on the track than it was financially and by the summer of 2018, the Company was in a precarious financial position. The Company went into administration and appointed joint administrators on 27 July 2018 (the “Joint Administrators”).

The Pension Schemes Act 2021 (‘the Act’) has received Royal Assent, with the UK government indicating that key provisions will come into force by autumn 2021.

The Act includes a number of provisions that will significantly impact restructuring activity involving financially distressed groups with a UK defined-benefit (DB) pension scheme.

What will change under the Act?

Below are some of the most significant changes being introduced by the Act.

Landmark decision holds that the SFO does not have the power to procure documents from foreign companies outside the jurisdiction.