The following question was published in the Financial Times on 23 July 2011 and answered by Richard Curtin, a lawyer in the London office of Faegre & Benson LLP.

I run a food and drinks company supplying products to football clubs.  But we recently heard that one of the clubs we supply will probably go into liquidation very soon and we are concerned that we may not receive the money we're owed by it. Is there any action we can take now to make sure we are credited if and when the club becomes insolvent?

A CVA was introduced as one of the rescue arrangements under the Insolvency Act 1986. It allows a company to settle unsecured debts by paying only a proportion of the amount owed, or to vary the terms on which it pays its unsecured creditors. Whilst a CVA only requires approval of a 75% majority of the creditors by value, it binds every unsecured creditor of the company, including any that voted against it or did not vote at all.

A CVA was introduced as one of the rescue arrangements under the Insolvency Act 1986. It allows a company to settle unsecured debts by paying only a proportion of the amount owed, or to vary the terms on which it pays its unsecured creditors. Whilst a CVA only requires approval of a 75% majority of the creditors by value, it binds every unsecured creditor of the company, including any that voted against it or did not vote at all.

Ever since the establishment of the U.K. Pensions Regulator (the "Regulator") by the U.K. Pensions Act 2004 (the "Act"), the Regulator's exercise of its authority has been of major importance to the U.K.'s restructuring and rescue business. The first judicial review of the Regulator's powers, however, hints that some of the procedures it has adopted may be curbed in the future.

The Pensions Regulator and the Restructuring Environment

In a recent high profile case brought by the administrators of 20 insolvent companies in the Lehman and Nortel groups, the High Court ruled that the cost of complying with a financial support direction (“FSD”) issued after the date of the commencement of a company’s administration or liquidation by the Pensions Regulator would rank as an expense of the administration or liquidation.

The appointment of an administrator over the Connaught Group is expected any day. Many housing associations will have employed Connaught to carry out maintenance services under the JCT measured term contract or similar. These contracts contain specific provisions for the steps to follow if an administrator is appointed over the contractor (or some other form of insolvency).

The case of Bulbinder Singh Sandhu (trading as Isher Fashions UK) v Jet Star Retail Limited (trading as Mark One) (in administration) highlights that care needs to be taken to ensure that Retention of Title (RoT) clauses are effective. More information on ROT clauses is available in our 'Litigation survival guide - part 3. Retention of title: sellers beware!'

The facts

Insolvency procedures involving companies are complex and generally take a long time to complete. There is plenty of jargon which adds to the confusion, whereas all that an unsecured creditor usually wants to know is how to make a claim for the monies owed to him by the company, to whom the claim should be made, how long it will take to decide the claim and whether there is a possibility of recovering any monies from a company which is obviously experiencing financial difficulties.

The Third Parties (Rights against Insurers) Act 2010 received Royal Assent on 25 March 2010. The Act modernises the Third Parties (Rights against Insurers) Act 1930 by streamlining the procedure by which a third party claimant can recover compensation from the insurer of a defendant.

The case of Goldacre v Nortel, decided in December, has clarified the circumstances in which an administrator is liable to pay rent under a lease as an expense of an administration. If rent is an expense of the administration, the landlord will almost certainly be paid in full for as long as the administrator uses the property. If it is not such an expense, the landlord will be an unsecured creditor who will be lucky to receive a few pence in the pound.