The Bankruptcy (Scotland) Act 2016 came into force yesterday, 30 November 2016, together with other consequential amendments and changes to the Court Rules which relate to bankruptcy in Scotland.

When this topic was last considered two years ago, there was a real danger of pension rights (previously thought of as sacrosanct) being within the reach of trustees in bankruptcy by way of an income payments order (IPO). There were also two conflicting first instance decisions in play. The issue? Whether a pension entitlement capable of drawdown by election, but not yet in payment, can fall within the definition of income in section 310(7) of the Insolvency Act 1986 (IA86), and so be the potential subject of an IPO.

Summary

This is the latest case in the long running saga of attempts to make Mr Maud bankrupt.

Facts

The saga centres around a high value property complex in Spain. Mr Maud and objecting creditors contended on his appeal against a bankruptcy order made by the Registrar against him that the reason why the petitioners sought a bankruptcy order was for the ulterior motive of taking control of the property structure and that the order should be overturned.

The effects of bankruptcy are invariably demoralising and can have wider, sometimes unexpected, results for other members of the family. In no other area can this be as distressing as the potential loss of the family home.

Between family partners, whether or not married, it is usual for the family home to be owned jointly. If one of those partners is declared bankrupt, then, even if the other is blameless in connection with their finances, the effects on that blameless partner and any children can be devastating.

Key Points

• A dividend is a ‘transaction’ and therefore can be challenged under s 423 IA 86
• A duty to act in the best interests of creditors does not arise simply because there is a risk of insolvency which is not ‘remote’

The Facts

RBS announced last month that SME customers will automatically be entitled to a refund of the fees that they were charged whilst being managed by the Bank’s Global Restructuring Group (GRG) between 2008 and 2013 following a review by the FCA.

This offer follows on from the payments RBS has made in recent years for the mis-selling of PPI and interest rate swap products which has resulted in £1.8 billion of redress costs.

This article examines possible consequences for SMEs that were in GRG during the relevant period which now are, or have been, in an insolvency procedure.

New Rules for Imposing Personal Liability on Directors of Insolvent Companies

When a company enters into an insolvency process, a director may be made personally liable for an insolvent company’s debts on a few limited bases under the Insolvency Act 1986, the most common of which are:

1. wrongful trading: if the director knew or ought to have known that there was no reasonable prospect of avoiding insolvent liquidation and he did not take every step necessary with a view to minimising the loss to creditors;

Savers who become bankrupt but have not yet drawn their pensions will not have to hand them to creditors after a ruling of the Court of Appeal put an end to fears that pension pots were at risk.

The Court of Appeal upheld the High Court’s ruling on Horton v Henry, originally heard in 2014, settling legal difficulties arising from a conflicting judgment of Raithatha v Williamson (2012); and the introduction of the pension freedoms.

The facts

Through corporate acquisitions and asset transfers, BAT Industries plc (“BAT”) (a Claimant in the proceedings) became liable to contribute to the clean-up of the sediment of the Lower Fox River in Wisconsin, U.S.A. Arjo Wiggins Appleton Limited (“AWA”), a wholly owned subsidiary of Sequana SA (“Sequana”) (a Defendant in proceedings), became liable to indemnify BAT for part of any monies paid out. Provision was duly made in AWA’s accounts to reflect a best estimate of the value of such liability.

The Housing and Planning Act changes what happens to insolvent housing associations, says Séamas Gray in an article for Inside Housing.

Traditionally, when a company becomes insolvent, it enters one of several types of insolvency processes and its assets are typically sold to the highest bidder to raise as much money as possible to distribute to the company’s creditors.

In relation to a housing association, this might well mean a sale outside the regulated sector with the knock-on effect of an immediate reduction in available social housing.