Insolvency Blog -

Success fees arising from CFAs (Conditional Fee Agreements) and premiums for ATE (After the Event) insurance continue to be recoverable in insolvency litigation. The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Commencement No. 5 and Saving Provision) Order 2013 provides that CFA success fees and ATE insurance premiums cannot be recovered from the losing side in litigation generally, but proceedings brought by a liquidator, administrator, trustee in bankruptcy, company in administration or company in liquidation are exempt.  This means that creditors are not forced to suffer these costs. So far, so good.  But what we don’t want...

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Rarely a customer of HMV and never of Blockbuster, do I still have insight into their administrations this week? Content is king and optical storage media have little emotional appeal. Why not get music and video from hard drives and broadband? Most TV seems to come to me via Tivo and - apart from some treasured vinyl - DAB and streaming should suffice for audio. Even the car player is hard disc based. No one should have been surprised about HMV or Blockbuster. Their markets moved and they did not. Are there more such failures to come? I'm no...

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The Commission is proposing to modernise the current rules on cross border insolvency which date from 2000. The proposal, published on 12 December 2012 and which incorporates detailed proposed amendments, states:  “Benefitting from ten years of experience, the new rules will shift focus away from liquidation and develop a new approach to helping businesses overcome financial difficulties, all the while protecting creditors' right to get their money back.” The elements of the proposed reform of the Insolvency Regulation can be summarised as follows:  Scope: The proposal extends the scope of the Regulation by revising the definition of insolvency proceedings...

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In this court case the claimant was an industrial and provident society who specified a credit limit for its members. One of its member’s fell into arrears and the claimant threatened to withdraw its credit. Two individuals agreed to provide Personal Guarantees (“PG’s”).  The member later increased its limit and asked the guarantors to sign new guarantees, which they refused to do. The member subsequently went into liquidation and the claimant called upon the PG’s. The guarantors argued that they were not liable because: They had not received any consideration for...

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Zombie companies – the living dead that cannot repay debt or invest to grow – are a serious drain on the economy. I wrote almost a year ago on this theme, suggesting that the Chancellor had missed a trick in failing to tighten the definition of non-performing loans so that loans to zombie companies are not counted towards banks’ capital adequacy. Other commentators have been equally (or more) outspoken.  Jon Moulton is one of the more high profile proponents of the view that zombies should be allowed to fail and go through an insolvency process, enabling the assets...

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A recent High Court decision has confirmed that a winding up order can be made even if the debt supporting the petition is in dispute. The defendant argued that the exact position between the parties was complex and there was uncertainty as to the precise sum due. The Court rejected this defence having considered whether or not any part of the debt was indisputable and, if so, did it exceed the statutory minimum of £750. The Court found that it should not be concerned about determining what could be proved in a winding up only whether or not the petitioner...

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I am delighted to announce the formation of a new LinkedIn group for Young Insolvency Professionals London ‘YIPL’.  Setup by Henry Page and Tom Guthrie who work within Mercer & Hole’s Restructuring & Insolvency team in London, the group has been setup to provide a forum for young insolvency professionals to share practical experiences, technical tips, seek guidance and just as importantly arrange get togethers.  We feel that this ‘interactive group’ with regular informal gatherings will provide an appropriate forum for the young and ambitious insolvency professionals to meet and share...

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As previously reported, the Government introduced legislation into the Corporation Tax Acts covering the practice previously contained in Extra-Statutory Concession C16 (ESC C16) which took effect on 1 March 2012. In broad terms, under the new legislation, provided certain conditions are satisfied, where total distributions do not exceed £25,000 such distributions will be treated as a capital receipt in the hands of the shareholder.  However, initially it was not clear whether the share capital was to be included in the “total amount of the distributions”.  HMRC have now confirmed that it should not and the threshold is to...

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In a packed break-out session – standing room only! – INSOL Europe’s Turnaround Wing (which I co-chair) discussed the Mexican stand-off: forcing consensual restructuring solutions on stakeholders. The oxymoronic phrase highlights the challenges of operating in the twilight zone between severe distress and formal insolvency. The key points highlighted were: Whether the impact of insolvency is clear or, as in some jurisdictions, ill-defined, insolvency is a threat that promotes consensus through fear of the unknown or the unacceptable. Valuations bring clarity, but will be tempered by issues that can be identified in the legal documentation. Cultural effects may...

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The Travelodge CVA has been hailed as a success with 6,000 jobs saved and 97% creditor support, not least by the British Property Federation, which claims that Travelodge is one of the many businesses saved by landlords backing CVAs.  However, the BPF continues to challenge the CVA as a restructuring process, implying that CVAs are unfair to landlords.  The real issue is proper recognition of the covenant between a company and its creditors.  Landlords are a special type of creditor in that they frequently enjoy deposits and guarantees and have special remedies, but they bear relatively high risks of...

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