The Bankruptcy (Scotland) Act 2016 (the “Act”) received Royal Assent on 28 April 2016 and is expected to come into force by the end of the year.

The Act is only the second piece of primary consolidation legislation to have passed through the Scottish Parliament and brings together the various laws on personal insolvency into a single piece of legislation.

At the moment, the law is rather unwieldy and difficult to follow in practice.

On 25 May, the Insolvency Service published a consultation paper on options for reform of the UK's corporate insolvency regime.

This blogpost was first published as an edited article in Business Magazine’s June 2016 edition (available here).

Directors at risk in the twilight zone

Further to our updates in December and January, there has been a further development in relation to this case. The High Court heard the second adjourned hearing of the bankruptcy petition in relation to Glenn Maud.

The adviser group 2 session on Monday 23 May comprised Owen Clay, corporate lawyer for Arcadia and Traveta (Linklaters); Steve Denison, auditor of Traveta and its subsidiaries, including BHS (PwC); and Anthony Gutman, ‘informal’ adviser to the Arcadia Group (Goldman Sachs).

The questioning focused on the solvency position of BHS at the time of the acquisition, the level of due diligence undertaken on the eventual acquirer (Retail Acquisitions Ltd) and the recognition of the pensions deficit in the deal negotiation.

Last week the UK Government issued a consultation document on changing UK insolvency legislation to enable distressed companies to obtain a moratorium for up to three months, with the possibility of an extension, under the supervision of an insolvency practitioner. The moratorium would prevent all creditors, including secured creditors, from taking any enforcement action against such companies without first applying to court for permission to do so. This follows a briefing paper published by R3 last month suggesting a similar moratorium process.

FACTS:

InHinton v Wotherspoon [2016] EWHC 623 (CH), Jason Freedman and Aziz Abdul successfully secured an Income Payments Order (“IPO”) on behalf of the Trustee in Bankruptcy.

The court also provided useful guidance on the correct position where a bankrupt has made an election to draw down from his private pension but not given specific instructions as to application of the funds.

LEGAL BACKGROUND:

(1) PST ENERGY 7 SHIPPING LLC; (2) PRODUCT SHIPPING & TRADING S.A. V. (1) O.W. BUNKER MALTA LTD; (2) ING BANK N.V. [2016] EWSC 23 (‘RES COGITANS’)

Judgment of the Supreme Court, 11 May 2016

Introduction

In the first 3 months of this year, company insolvencies increased for the first time since 2014. In April, UK manufacturing activity contracted for the first time in 3 years.1 A range of explanations has been offered including

weaker domestic demand, low oil prices hitting production and uncertainty created by the EU referendum. It the circumstances, it seems timely to look at one of the remedies that can be available to manufacturers and suppliers in the event of a customer failing to pay for goods.

The Employment Tribunal ruled last month that ex-employees of Sahaviriya Steel Industries UK Limited (in liquidation) (“SSI”) are entitled to the maximum protective award for a complete failure by SSI to inform and consult with them about their redundancies (90 days’ pay for each of the 1100 employees affected).