When there is a dispute as to which administrator should be appointed, the wishes of the creditor, for whose benefit the administration was, takes precedence.
A business you are buying or selling, if reorganised for sale, may be less valuable if you do not avoid tax pitfalls. This note highlights the most common pitfalls, including those related to an insolvency. You can avoid most with planning.
Reorganisations
Many businesses will now be considering transactions involving corporate reorganisations. They might want to take advantage of market conditions to buy or be considering the sale of business units to refocus strategy. Or they might become involved in an insolvency or reconstruction.
A business you are buying or selling, if reorganised for sale, may be less valuable if you do not avoid tax pitfalls. This note highlights the most common pitfalls, including those related to an insolvency. You can avoid most with planning.
Reorganisations
Many businesses will now be considering transactions involving corporate reorganisations. They might want to take advantage of market conditions to buy or be considering the sale of business units to refocus strategy. Or they might become involved in an insolvency or reconstruction.
One of the significant changes to distributions in insolvency made by the Enterprise Act 2002 was the abolition of the preferential status of debts owed to the Crown and the introduction of a provision for the creation of a ‘ring-fenced fund’ (also known as the “prescribed part”, an amount currently capped at £600,000) from the proceeds of floating charges created after 15 September 2003 to be applied in distribution to unsecured creditors.
The recent downturn in the economy is undoubtedly having an adverse effect on the cash flows of a large number of businesses in the UK. Businesses are keeping a much closer eye on outgoings and expenses, and may be looking to ease financial pressure by making payments due to creditors as late as possible.
For a business operating from leased premises, quarterly rental payments are likely to be one of the biggest outgoings. The longer the rental payment remains in the tenant's bank account, the more interest they will accrue and the more likely that cash flow issues will be eased.
Secured creditors with an unsecured shortfall cannot claim a share of the prescribed part of the floating charge realisations set aside for unsecured creditors under Section 176A of the Insolvency Act 1986. This applies whether the secured creditor is the holder of a fixed or a floating charge (or both).
Summary
Background to Re Permacell
Re Powerhouse Limited: Prudential Assurance Company Limited v PRG Powerhouse Limited [2007] EWHC 1002 Ch Guarantees are widely used in commercial transactions to provide assurance to creditors that debts or other obligations owed to them are discharged fully in the event the principal debtor fails to perform. This assurance was shaken by the steps taken in early 2006 by PRG Powerhouse Limited (Powerhouse) to enter into a company voluntary arrangement (CVA) that contained proposals to release certain parent company guarantees given to landlords of premises being vacated by Powerhouse.
A fashion retailer in administration had unpaid rates of over £2.6 million across its many outlets. The court was asked to consider whether the administrators were liable to pay the accrued rates as "expenses of the administration", meaning that they would take priority over sums due to other unsecured creditors.