Insolvency Blog - UK Insolvency

Some say we are on the brink of a major slow down. Clearly the economy is not as strong as it has been, but surely the real questions are: just how sharp is the ‘adjustment’ likely to be; how long will it last; and where will it be felt most? Let’s look back over some recent figures and at the same time consider what the future may hold: Currently GDP is growing at 2.9% pa and is expected to fall to under 2% over the next few months. Research has shown a 1% drop in GDP growth could lead...

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An interesting case passed through the Court of Appeal a few weeks ago, which counsel for the bank concerned said could impact on a good number of cases where banks have acquiesced in allowing borrowers to remain in their homes. In the National Westminster Bank v Ashe case, a trustee in bankruptcy took action to defeat Nat West's second charge over a property on the basis that the bank's debt, and its rights of repossession, had both become statute barred under the Limitation Act 1980. The fact that the case was taken by a trustee in bankruptcy is not relevant, the...

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Directors' duties Directors' duties can be onerous at the best of times. The general duties have been codified in the Companies Act 2006 and are summarised simply in the following Ministerial statement: Act in the company’s best interests taking everything you think relevant into account. Obey the company’s constitution and decisions taken under it. Be honest and remember that the company’s property belongs to it and not to you or its shareholders. Be diligent, careful and well informed about the company’s affairs. If you have any special skills or experience...

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We reported just over a year ago (here) on Euler Hermes' 2006-2007 Insolvency Outlook, which suggested a 3% increase in business insolvencies in 2007. Their latest report, issued in November 2007, forecasts under the headline  "United Kingdom - A rise in insolvencies in sight" an 8% increase in insolvencies in 2008. Interestingly, it relates that increase to GDP growth of 2%. Three months on, forecasts are for rather lower GDP growth. The Bank of England Inflation Report published on 13 February suggests (here) a decline to well below 2% GDP growth during 2008, particularly when the Governor's introductory remark is taken into account: "the potential for further falls...

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Shopfitter JDS Group Limited was not saved by a critical mass of 350 staff and £30m turnover as it went into administration on 12 February, suggesting that retail problems (see our previous post - Retail insolvencies as the credit crunch hits the high street), or their underlying causes, may be knocking-on into the construction sector. Certainly, the construction industry is not confident at the moment - less so than retailers according to the ICAEW Business Confidence Monitor (here). The ICAEW also notes: "In line with the expected slowdown in predicted capital spending growth, a greater proportion of firms report increased challenge...

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We reported in our earlier blog 'Retail Insolvency News', that the New Year is a time when retail insolvencies tend to come to the fore.  Some British retailers, hit by poor Christmas trading, may struggle to pay their December rent bills, forcing them into insolvency or a debt restructuring in the New Year.  Experts are predicting that the most likely to run into trouble are 'big ticket' retailers selling discretionary products.   So noted Credit Today recently.  As one of those whose view they sought I think there are systemic risks and...

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The cash flow or commercial insolvency test contains a flexible and fact sensitive futurity requirement in the phrase “as they fall due”, according to Briggs J in Cheyne Finance Plc (in receivership) [2007] EWHC 2402 (Ch). Cheyne was a structured investment vehicle (“SIV”). It was one of the first SIVs to go into receivership as a result of the credit crunch. The receivers sought the court's directions as they had to identify whether an “Insolvency Event”, which was defined by reference to the cash flow test in s123 Insolvency Act 1986, had occurred. s123(1)(e)...

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We reported in September 2007 (here) the consultation paper issued by the Insolvency Service setting out its proposals to modernise and streamline the law governing insolvency procedures. You may recall the disenfranchising proposal requiring creditors to “opt in” if they wish to receive information on or to participate in the insolvency process. The Insolvency Service now reports (here) that the consultation was completed in December 2007. Responses are being reviewed and necessary changes to primary legislation will be taken forward in late 2008, with a view to implementation on 1 October 2009. Another modernisation project relates to the Insolvency Rules. The Insolvency...

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An industry news snippet for those who missed it: Tenon's recent acquisition of Haines Watts BRI's insolvency practice was done through an administration pre-pack (PwC were the administrators)....

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In 2003 the Enterprise Act made several major changes to insolvency law, including dropping the preferential status of the main government departments and the creation, through Section 176A of the Insolvency Act 1986, of a 'prescribed part'. This was done in an attempt to improve the chances of unsecured creditors receiving some return in 'larger' liquidations. It has taken until now to answer the question of whether a floating charge holder who experiences a shortfall on their secured debt, which would fall to be unsecured, can share in the 'prescribed part', discussed in a previous post here. In a judgement handed...

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