Insolvency Blog -

The balance sheet test for insolvency (section 123(2), Insolvency Act 1986), first addressed by the High Court in August 2010, has been revisited on appeal. The first instance conclusion that each case should be decided on its legal (rather than accounting) merits has been strongly reinforced by the Court of Appeal in BNY Corporate Trustee Services Ltd v Eurosail - UK 2007 - 3bl Plc & Ors [2011] EWCA Civ 227. The Master of the Rolls (Lord Neuberger) noted in his leading judgment that: "I do not consider that the question whether section 123(2) applies simply turns on the question whether the liabilities of a company ...

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The latest GDP figures released this morning by the Office of National Statistics show a contraction of the UK's economy for the last quarter of 2010 by 0.5%.This is despite forecasters expecting growth of between 0.2%-0.6%. More than three years after the collapse of Lehman Brothers and the demise of Northern Rock could the UK be about to enter the previously much predicted 'double dip' recession?   With many businesses stretched to the limit and relying on a strong Christmas to improve cashflow, the contraction of the ecomony may be one more nail in the recovery's...

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Statistics recently issued by HMRC for the Business Payments Support Service (BPSS) since its inception confirm there has been a 45% drop in the number of arrangements approved for the first nine months of 2010 compared to the same period of 2009, whilst the level of rejections has doubled to 5.2% over the same period. A closer inspection reveals a rejection rate of 6.9% for the three months ending September 2010, indicating a significant upward trend over the last few months. The information released highlights other changes in ways in which the Time to Pay scheme is being used by taxpayers. Whilst over the period from...

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The administrators of 20 Lehman and Nortel companies face meeting Financial Support Directions (FSDs) and Contribution Notices (CNs) from The Pensions Regulator as an expense of the administrations because of the judgment handed down by Mr Justice Briggs. The implications for the rescue culture are severe - unless the hope expressed by Briggs J "that a higher court may find a way through or around the existing authorities" is rewarded as the case is appealed. The scope of the decision should not be underestimated. Any administration of a company that has been, at any time within the previous two years, an...

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Rubin & Lan v Eurofinance led us to say in August 2010 that the Court of Appeal had taken a novel approach founded on the principles of modified universalism, developing the common law and allowing enforcement of a foreign insolvency judgement when an ordinary foreign judgement could not have been enforced. Permission to appeal the decision is currently being sought from the Supreme Court. In anticipation of that appeal a critical commentary on the Court of Appeal decision concludes that: "The Supreme Court must not allow the basis for enforcing foreign insolvency judgments to be floated on a...

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1,800 redundancies have been announced today by the administrators of Rok plc and Rok Building Ltd. The redundancies are in the maintenance and improvements division throughout the UK and also in the construction business in Scotland. On top of the 1,066 redundancies already announced at Rok in the last week, another 1,800 construction industry jobs being lost will be devastating for the individuals in question less than 6 weeks before Christmas, as well as being a blow to the industry and the economy. Worse, that is only part of the story. There will be many sub-contractors and suppliers who ...

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Rok , the building and social housing repairs company was placed into Administration on 8 November, just 10 weeks after Connaught suffered the same demise. Both of these companies were dependent upon public sector contracts, employed a large workforce and relied upon numerous suppliers and subcontractors, who are likely to feel the knock on effect. According to KPMG, in Connaught’s case, claims from unsecured creditor’s are likely to exceed £46m, with a further 50,000 'lost' invoices still to be considered. The Administrators have said that there is no single factor responsible for Rok’s failure and that accounting...

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I'm delighted to announce that my fellow partner at Mercer & Hole, Chris Laughton, has been appointed today (17 October 2010) President of INSOL Europe, the pan-European members organisation for insolvency professionals. A specialist in cross-border restructuring and insolvency activities, Chris is based at our London City office. Chris has chosen to champion the theme of communication during his presidency term. For Chris this includes encouraging his peers to communicate more effectively with stakeholders and the wider business community. He wishes to achieve a better understanding of the skills and legislation insolvency professionals bring to bear when seeking to rescue a failing...

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Connaught PLC's administration illustrated the risk to private sector business of public spending cuts (Connaught collapse blamed on government spending cuts). That risk is further highlighted in research, statistics and commentary from such diverse sources as R3 (The Association of Business Recovery Professionals), the TUC and Boris Johnson. The key finding of R3's new research, based on telephone interviews with small business owners in August 2010, is that: "One in ten or 150,000 small businesses say they are in danger of going into insolvency should their public sector contracts cease." The Trades Union Congress forsees a...

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The impending administration of the FTSE 250 social housing company, Connaught PLC, is widely reported today. This tangible illustration of the effect government spending cuts can have on industry poses questions about the future of the UK economy. There will be a knock-on effect as the company's customers, suppliers and sub-contractors, its 10,000 strong workforce and the social housing sector as a whole will be hit. There may be additional reasons for Connaught's failure, but what other companies (along with their suppliers and sub-contractors) are going to suffer because of government spending...

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