The Court of Appeal has resolved previously conflicting case law to confirm that a bankrupt cannot be obliged to crystallise his pension benefits in order to produce income to pay off creditors.

In the May 2015 edition of Pensions Priorities we reported on a case where the High Court found that an agreement dealing with the costs associated with the secondment of employees between group companies included liability for the receiving company to pay for the section 75 debt arising in relation to the seconded employees.

Long service changes

A recent case in the insolvency courts has seen the court considering the possibility of forcing a bankrupt pension holder to draw down funds to be used by their trustee in bankruptcy.

Time will tell whether this type of order will filter into financial settlements on divorce. There are already a number of options for dealing with pensions on divorce that I consider with my clients, particularly when creating bespoke and creative solutions for them. The ability to force someone to draw on their pension would have to be seen as a last resort but would be a tool worth having.

The IECA has released its Master Netting Agreement, a state-of-the-art solution ensuring credit exposures are managed and netted under a single, integrated framework that is flexible and easy to implement.

There has been considerable controversy about the extent of the powers, and the extent of obligations of a business rescue practitioner in relation to a cession of book debts by the company in rescue.

This is an important issue in business rescue because most financially distressed companies have an overdraft facility with a bank which is secured by a cession of debtors. Many practitioners want or need to use the overdraft facility as working capital.

Cession (generally)

Court holds Bankrupt cannot be forced to draw scheme benefits to pay creditors

In its judgment in Horton v Henry the Court of Appeal has held that where a bankrupt member has acquired a right to draw benefits, but has not yet done so (a) his rights under the scheme are not "income" over which the court can make an income payments order under section 310 of the Insolvency Act 1986; and (b) the trustee in bankruptcy cannot compel the member to take his benefits.

Background

When someone is made bankrupt, their interest in the family home vests automatically in their Trustee in Bankruptcy, upon his or her appointment. The Trustee has 3 years from the date of the bankruptcy order to realise this interest. The Trustee will first of all ask if a third party is willing and able to purchase the Trustee’s share, usually 50% of the available equity. If that is not possible, then the Trustee will request that the property is put on the market for sale. As a last resort, the Trustee can apply to the Court for an order for possession and sale of the property.

There are certain rules and regulations surrounding company liquidation, many of which focus on your actions as a director. Once a company becomes insolvent, you must put creditor interests first by ceasing to trade and safeguarding its assets, with little or no consideration for shareholders, members or directors.

Click here to view the image.
What does this letter say?

“I have today seen and distrained on the goods listed in the inventory below. I did this at xxx