Insolvency Blog -

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...

Click here to continue reading.

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...

Click here to continue reading.

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...

Click here to continue reading.

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...

Click here to continue reading.

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...

Click here to continue reading.

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...

Click here to continue reading.

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...

Click here to continue reading.

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...

Click here to continue reading.

The Telegraph reports “Insolvency Service reform scrapped - the Government has scrapped plans to reform the process that leads to rogue directors being struck off.” Apparently in order to “reduce red tape for the smallest companies”, the Department for Business, Innovation and Skills has shelved an initiative to streamline the process of insolvency practitioners (many of whom are micro businesses) reporting directors’ misconduct. How red tape can be reduced by not streamlining a burdensome regulatory process is beyond me!   ...

Click here to continue reading.

Creditors collectively approved Mercer & Hole’s strategy for the administration of Masai GB Limited at yesterday’s creditors meeting.  Chris Laughton and Peter Godfrey-Evans of Mercer & Hole had been appointed in May 2012 as joint administrators of the UK distributor for the high-street shoe brand MBT with stores and concessions throughout the UK. The administrators had the company continue to trade for as long as stocks were available and costs could be controlled tightly. The result was 2 months of profitable trading, during which some of the 53-strong workforce could continue to be employed. The prospects for...

Click here to continue reading.