Jurisdiction(s):
United Kingdom

Avanti: High Court clarifies control threshold for fixed charges under English law; rejects total-prohibition requirement, upholds fixed security over satellite assets; HMRC priority and completion-structure implications

Published on: 02 May 2023

Published by a LexisNexis Restructuring & Insolvency expert

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Article summary

Re Avanti Communications Ltd [2023] EWHC 940 (Ch)

This marks the first substantial judgment on the divide between fixed and floating charges since the House of Lords’ landmark ruling in Re Spectrum Plus [2005] UKHL 41, which reclassified an apparent fixed charge over book debts as floating because the chargor could freely deploy the charged assets and the security holder therefore lacked the requisite control to constitute a fixed charge. The designation of security as ‘fixed’ or ‘floating’ under English law now carries even greater weight given HMRC (the UK tax authority) ranks as a preferential creditor for certain taxes in insolvency—ie those taxes sit behind fixed charge realisations but ahead of floating charge realisations. That characterisation had a decisive effect on the order of payments in Avanti’s administration: as the charge was properly treated as fixed, the secured creditors recovered in full; had it instead been treated as floating, part of the proceeds would have been payable to HMRC (as preferential creditor) and to unsecured creditors up to the ‘prescribed part’ cap of £800,000. In short, control and freedom of use were decisive, shaping priority and recoveries across the administration’s distribution waterfall and outcomes. The ‘fixed vs floating’ charge...

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