Liquidation preference meaning

Restructuring & Insolvency weekly highlights—6 June 2024 In this issue: Key R&I law developments Insolvency litigation Restructuring Corporate insolvency processes The office-holder Daily and weekly news alerts New content Key R&I law developments Digital Markets, Competition and Consumers Act 2024 This Act introduces regulation of competition within digital markets, revises the Competition Act 1998 and the Enterprise Act 2002 with additional competition law measures, and enhances consumer protection by providing and extending rights, together with related purposes. Certain provisions took effect on 24 May 2024; the remainder will commence on a day set by Regulations made by the Secretary of State. See: LNB News 04/06/2024 9. Insolvency litigation Monies paid to a bankrupt’s son were after-acquired property (Hyde v Djurberg) It is uncommon for a bankrupt to receive a significant payment that a trustee in bankruptcy may claim as after-acquired property. Rarer still is an instance where such a payment is received...

Bourne (as liquidator of MM Apartment Letting Ltd) and another company v Manukyan and another [2024] EWHC 832 (Ch) What are the practical implications of this case? The judgment acts as a helpful illustration of the principles the court will apply and consistently enforce in situations of this nature where numerous unexplained transfers have been made from a company’s bank account ahead of its liquidation, and the sole director fails to provide an adequate justification. What was the background? The applicant liquidator sought relief against Mr Manuk Manukyan, the sole director of MM Apartment Letting Ltd (the ‘Company’), under IA 1986, ss 212, 238 or 239 in respect of: a dividend declared and paid in June 2018 after the deemed commencement of the winding up petition, where the payment was effected without a validation order; and various payments between 14 August 2017 and 13 April 2018 made by the Company out of its bank account before its winding up, for which no...

Nosnehpetsj Ltd (in liquidation) v Watersheds Capital Partners Ltd and another [2020] EWHC 1938 (Ch), [2020] All ER (D) 144 (Jul) What are the practical implications of this case? The key takeaway is that directors will generally be held to the content of confirmation statements, accounts and, for the period before 2016, annual returns. Many private companies operate with a degree of informality, and directors sometimes shift assets within a small group merely by reflecting the transfers in those filings. A director who acts in that way is unlikely to be allowed to step back from those actions by asserting that corporate formalities were not observed, particularly where third parties have relied on the records or one group company has gone into insolvency. The old saying that equity will not assist a volunteer carries limited weight in corporate contexts. The modern stance is that equity will not go out of its way to thwart a gift. Contemporaneous records will be preferred over after-the-event assertions by directors. The decision also...

Sections 242 and 243 of the Insolvency Act 1986 (IA 1986) In Scotland, these provisions regulate the two principal forms of antecedent transaction that a company may undertake. They do not apply to individuals or to companies registered in England and Wales; for the position in England, refer to the Practice Notes on transactions at an undervalue under section 238 and on preferences under section 239 of the Insolvency Act 1986. For Scottish individual/personal debtors, consult the Practice Note on gratuitous alienations by individual debtors. For a glossary of frequently used Scottish insolvency terminology, see Practice Note: Glossary of Scottish insolvency words and expressions. Unfair preferences What constitutes an unfair preference? An unfair preference is any transaction entered into by a company, whether before or after 1 April 1986, that has the effect of giving one creditor priority over the general body of creditors (IA 1986, s 243(1)). The date on which the unfair preference arises is the date the transaction became effectual. Hardening periods...

This glossary sets out numerous expressions frequently encountered in the restructuring arena. Words appearing in the definitions in bold are explained in other entries in this glossary. For further banking terminology, see the principal Banking & Finance Glossary. Restructuring glossary—A Acceleration: Acceleration means the agent, acting on directions from the majority lenders after an event of default, takes formal action, for example calling for early repayment of the facility. Ad-hoc committee: A temporary creditors’ group (often contrasted with a formal committee) that lacks any entitlement to official recognition. Administration: A process under the IA 1986 in which a financially distressed company is operated by an administrator as a going concern before longer-term outcomes, such as break-up and sale, are pursued. Administrator: An Insolvency Practitioner named by the court, a Qualifying floating charge holder, the directors or the company, to take control and fulfil one of the purposes in IA 1986, Sch B1. Administrative receivership: Arises when a company breaches the terms of...

This is a glossary of common words and expressions used in Scottish insolvency law with the nearest England and Wales insolvency law equivalent (where relevant) Absolute insolvency Meaning: When a person’s liabilities are greater than the overall worth of their assets. Nearest English equivalent: Balance sheet insolvency. Accountant in Bankruptcy (AiB) Meaning: A Scottish Government agency overseeing the regulation of personal bankruptcy (sequestration and Protected Trust Deeds) in Scotland, and able to serve as trustee in sequestrations where no insolvency practitioner is appointed. It also maintains records of corporate insolvencies in Scotland (receivership and liquidations only) but does not perform the role of Official Receiver. See Practice Note: Scotland: the Accountant in Bankruptcy. Nearest English equivalent: N/A. Accountant of Court Meaning: A court-appointed officer within Scottish Courts and Tribunals who administers funds consigned to the Accountant of Court pursuant to a Court of Session interlocutor or during liquidation proceedings. They oversee Judicial Factors or Administrators appointed by the Court to manage estates...