Legal Practice Notes

This Practice Note covers: the impact of an insolvency process on ongoing litigation where the debtor, bankrupt or insolvent company is a claimant or defendant how an insolvency process interacts with an arbitration agreement binding the debtor, bankrupt or insolvent company additional considerations in a cross-border setting Personal insolvency What happens when the bankrupt is a claimant in ongoing proceedings? The presentation of a bankruptcy petition, whether by a creditor or by the debtor, has no legal consequence for proceedings already on foot where the debtor is the claimant. Once a bankruptcy order is made and a trustee in bankruptcy (the trustee) is appointed, most causes of action in which the bankrupt has an interest vest in the trustee under section 306 of the Insolvency Act 1986 ( IA 1986). In such circumstances, it is the trustee, rather than the bankrupt, who has standing to carry on the claim. The...

This Practice Note This Practice Note examines the Consumer Rights Act 2015 ( CRA 2015) as it applies to goods and outlines the consumer’s statutory entitlements under contracts for the supply of goods. It explores the benchmarks required of goods, consumer remedies where goods do not conform, the rules on delivery and transfer of risk, guarantees and insurance-backed extended warranties, and the sale of used goods (including sales at public auctions). For an overview of CRA 2015, including definitions of key terms such as ‘consumer’ and ‘trader’, see Practice Note: Consumer Rights Act 2015—summary. For the application of CRA 2015 to other areas, see the following Practice Notes: Consumer Rights Act 2015—services Consumer Rights Act 2015—digital content Consumer Rights Act 2015—unfair terms Useful guidance on how CRA 2015 applies to goods has been issued by the Chartered Trading Standards Institute ( CTSI) and the...

Who is the nominee and what is their role in the CVA? The nominee is a central figure within a company voluntary arrangement ( CVA). For general background on CVAs as a whole, see Company voluntary arrangements—overview. Their involvement continues only up to the point at which the CVA proposal is either sanctioned or declined, and no further. A nominee must be a licensed insolvency practitioner ( IP). This stipulation ensures that any CVA will be subject to independent scrutiny throughout that phase. Historically, section 389A of the Insolvency Act 1986 ( IA 1986) permitted other persons to be authorised solely to act as nominees or supervisors in voluntary arrangements. In practice this route was never taken, and IA 1986, s 389A was repealed by the Deregulation Act 2015, being replaced by the introduction of a regime for the partial...

This Practice Note reviews the principal considerations around enforcing guarantees in a financing transaction, namely where a lender (most often a bank) has extended a loan to a corporate borrower that is supported by a guarantee from another group company of the borrower (eg the borrower’s parent company or one of its subsidiaries). It addresses the following questions: what claim does a lender have against a guarantor? by what means can a lender enforce a guarantee? how is enforcement approached where there are multiple guarantors? are there particular points to consider in syndicated transactions? are there any distinct considerations for guarantees given by individuals? The law regulating guarantees is complex and at times inconsistent; accordingly, this Practice Note is intended as a springboard for more detailed analysis. What is the nature of claim that a lender has against a...

Pre‑delivery payment financing ( PDP financing) has become a widely used funding tool for airlines and lessors. However, as the number of PDP transactions has risen, aircraft manufacturers have applied closer scrutiny to the industrial and commercial matters that arise when a financier participates in aircraft purchase arrangements. As a result, any PDP financing may involve significant commercial points to negotiate, together with, at times, complex legal questions, particularly in relation to security. PDP financing, and the protections open to any lender, differ substantially from other forms of aviation finance. Funding is supplied while the asset is still under construction, and security cannot be taken in the same way as for a completed aircraft. Therefore, the provisions setting out the steps to be taken on enforcement are of fundamental importance to the manufacturer, the purchaser and the lender. PDPs and purchase agreements What are...

This Practice Note considers the enforcement options available to lenders where they hold fixed security. It specifically addresses: the choices open when commencing enforcement action, and a list of key points to consider when enforcing against particular asset categories In practice, secured creditors typically seek to ensure that the greatest possible proportion of their security is fixed. However, achieving fixed security over every asset class is usually impracticable, as the level of control required to maintain a fixed charge can be inconsistent with the borrower operating its business effectively—for example, stock and cash held in current accounts. Accordingly, a lender will often take a debenture to permit both fixed and floating security across all of the company’s assets. A debenture may include legal and/or equitable mortgages over land and shares, fixed charges on assets such as cash deposits and goods and chattels, assignments of...

Potential grounds for challenge Since Part 26A of the Companies Act 2006 ( CA 2006) came into force, a considerable number of restructuring plans ( RPs) have faced formal objections from dissenting creditors and shareholders/members. This trend is unsurprising in practice, as a central attribute of the RP is the court’s ability to exercise the cross class cram-down ( CCCD) to bind a dissenting class when the statutory conditions or tests are met (see Practice Note: Cross- Class Cram Down under a Part 26A restructuring plan). It is highly likely that future RPs will continue to be challenged over time. Because the RP is a highly adaptable mechanism that affords wide latitude to its architects, the bases for opposition will vary markedly, shaped by the way any given RP is structured and the wider context and surrounding...

Practice Note This Practice Note sets out the applicable practice and procedure that applies to the winding up of a company (the debtor) pursuant to a creditors’ winding-up petition. The most frequent circumstances in which such a petition is presented are as follows: a creditor has served a statutory demand on the debtor and, after the 21-day period has lapsed, the company has not paid, secured, or compounded the amount due (see Practice Note: Company statutory demand)......

2013: Key Restructuring & Insolvency cases [ Archived] This Practice Note is archived and is no longer maintained. Re Magyar Telecom BV [2013] EWHC 3800 ( Ch), [2013] All ER ( D) 20 ( Dec) — Judgment: 3 December 2013 — Subject: Schemes of arrangement — Lexis®PSL analysis: schemes broadened to compromise non- English debt Isis Investments Ltd v Oscatello Investments Ltd and others [2013] EWCA Civ 1493, [2013] All ER ( D) 327 ( Nov) — Judgment: 27 November 2013 — Subject: Credit institutions—proceedings pending — Lexis®PSL analysis: when is a Part 20 claim part of pending proceedings in cross-border matters? Ovenden Colbert Printers Ltd Hunt v Hosking [2013] EWCA Civ 1408, [2013] All ER ( D) 188 ( Nov) — Judgment: 15 November 2013 — Subject: Transactions at an undervalue — Lexis®PSL analysis: mounting a successful...

This Practice Note reviews the application of the Hague Convention on Choice of Court Agreements by contracting states to the convention. It sets out the parties to the convention, as well as those states that have signed the convention but have not yet ratified it. It also outlines how the convention operates for contracting states. For guidance on further elements of the convention, see the following Practice Notes: Hague Convention on Choice of Court Agreements (jurisdiction and enforcement)— Brexit considerations Hague Convention on Choice of Court Agreements—scope Hague Convention on Choice of Court Agreements—jurisdiction Hague Convention on Choice of Court Agreements—enforcement Definitions This Practice Note uses a number of definitions: Hague Convention on Choice of Court Agreements— HCCH Convention on Choice of Court Agreements concluded on 30 June 2005 at The Hague EU( W) A 2018— European Union (...

Practice Note It has long been settled that a winding-up should not be set in motion where the petition debt is genuinely and substantially in dispute. Should an alleged creditor nonetheless try to proceed, the court may rely on its inherent jurisdiction to prevent a petition being presented. Moreover, treating the winding-up court as a tool for chasing debts amounts to an abuse of process. Yet there remains controversy over what amounts to a ‘genuine dispute’. This Practice Note reviews scenarios in which petition debts have been challenged and identifies key principles that emerge from the authorities and recent case law guidance and relevant commentary......

What is unjust enrichment and when is it used? A claim in unjust enrichment aims to strip from a recipient the benefits derived at another’s expense and return them to the blameless party. It is sometimes labelled ‘restitution’ or a ‘restitutionary claim’, although, strictly, restitution describes the remedy, while unjust enrichment is the underlying cause of action. The overlap in terminology stems from the fact that the unified concept of unjust enrichment emerged from claims that had long been treated as restitutionary. Contemporary unjust enrichment doctrine has evolved through centuries of jurisprudence; its core tenets were articulated by scholars and later endorsed by the highest courts. That historical lineage explains much of the present confusion about labels and categories. In this respect the subject is unusual, because instead of the principles being exhaustively set out in legislation and/or case law, a...

An administrator enjoys broad powers and latitude when running an administration and, consequently, the courts hesitate to intrude upon the process unless it is strictly required. That said, situations can arise where an administrator’s conduct should be contested if they are acting, have acted, or intend to act in a way that unfairly prejudices the interests of a member or a creditor of the company. Challenges to administrator’s conduct There are two principal provisions that enable a challenge to an administrator’s conduct. The first of these is paragraph 88 of Schedule B1 to the Insolvency Act 1986 ( IA 1986), which gives the court lawful authority to remove an administrator from office......

Introduction The UNCITRAL Model Law on Cross- Border Insolvency ( MLCBI) has no automatic force; rather, nations may choose to implement it in whole or in part, with or without adjustments. Of about 60 UNCITRAL Member States, those that have adopted the MLCBI are shown below. As ‘official language’ is not defined in the MLCBI, parties should check the local enacting law in the state where recognition is sought to confirm the language into which documents must be translated for recognition under the MLCBI (see MLCBI, Article 15.4). The table is only a guide, reflecting the official language stated in each country’s constitution. For instance, when England gave effect to the MLCBI via the Cross- Border Insolvency Regulations 2006 ( CBIR 2006), SI 2006/1030, Sch 2, para 4(3) requires the supporting affidavit to exhibit an English translation of any exhibit that is not in...

Practice Note Under section 305(2) of the Insolvency Act 1986 ( IA 1986), a core duty of the trustee in bankruptcy (trustee) is to collect, realise and distribute the bankruptcy estate. Accordingly, the trustee should act promptly to identify which assets vest, locate them, secure them, and determine the means of realisation. This Practice Note examines the categories of property interests that may pass to the trustee and the rules for assessing the scope of that interest. The focus is on how those principles operate in relation to the bankrupt’s main home. That property is usually the estate’s highest‑value asset and often gives rise to complexities, particularly if the bankrupt lives or has lived there with others. In a matrimonial or family home setting, competing claims may arise from a spouse or civil partner and, in some cases, children or other...

Recap of discharge from bankruptcy Bankruptcy starts on the date the court makes the bankruptcy order and lasts until the individual is discharged (section 278 of the Insolvency Act 1986 ( IA 1986)). A bankrupt is discharged automatically one year after the bankruptcy date ( IA 1986, s 279(1)), unless a criminal bankruptcy order has been made ( IA 1986, s 279(6)). Until discharge, a bankrupt must not, among other limits: act as a company director without the court’s leave obtain credit exceeding £500 without declaring that they are undischarged carry on business, directly or indirectly, under a different name from that used when made bankrupt without informing all those they deal with that they are undischarged be elected to sit or vote in the House of Commons On discharge: the debtor is no longer liable for their...

This Practice Note explores when and for what reasons you ought to pursue settlement of disputes, and the implications of failing to try to settle when directed to do so. For direction on who should participate in settlement discussions, the form a settlement might take, how it should be recorded, and the means of enforcement, consult the materials in this subtopic, including the following Practice Notes: Settling disputes—who, confidentiality and subject to contract Settling disputes—settlement offers ( Calderbank, WPSAC and Part 36) Settling disputes—how to document a settlement Settling disputes—drafting the settlement agreement Resolving disputes concerning settlement agreements What is settlement? A settlement is the product of agreement between the disputing parties to compromise and/or conclude the litigation, or to resolve matters where no proceedings have yet started. It comes about when one party makes an offer that is accepted by the other or others. Not all parties to the...

This Practice Note examines the service of insolvency proceedings on persons situated outside the jurisdiction. It does not cover service in general. For broader material on service, consult the following Practice Notes: Service of documents in insolvency proceedings—how service is effected, what must be served and when What you can do if you cannot effect service of insolvency proceedings on the respondent Is permission required to serve out of the jurisdiction? As a general rule, where service of applications issued within a formal insolvency procedure is required, the methods in CPR 6 apply, subject to any modifications the court may approve or direct (as provided by Insolvency ( England and Wales) Rules 2016 ( IR 2016), SI 2016/1024, Sch 4, para 1(8)). The table at the end of IR 2016, SI 2016/1024, Sch 4 confirms that, for the purposes of CPR 6, an...

Bona vacantia denotes ‘ownerless goods’. Under section 1012 of the Companies Act 2006 ( CA 2006), any assets not otherwise disposed of and still held by a company at the time of a company’s dissolution pass to the Crown as bona vacantia. This Practice Note examines the enforcement of security—whether by a mortgagee’s sale or by appointing a receiver—over property that has vested in the Crown bona vacantia, following dissolution. It addresses bona vacantia property, disclaimer, escheat, the role of the Crown/ Government Legal Department and the HM Land Registry’s guidance. It looks at these matters collectively and in an overview. How is a company struck off? Broadly, a company can be struck off the register of companies in two ways: voluntarily, on an application by the directors by the Registrar of Companies—the Registrar may strike off and dissolve companies the Registrar considers are not carrying on...

Companies beginning to exhibit financial strain often find their borrowings changing hands on the secondary market at prices below par or face value. The size of this discount signals the market’s judgement on the chances of full repayment. Original lenders of record, such as banks or loan originators, may wish to offload their exposure in the secondary market to: deleverage balance sheets to meet regulatory demands or maximise shareholder value; dispose of non-performing loans; pare back exposure to a particular debtor or sector in line with strategic aims. In complex restructurings, high levels of debt churn can frustrate talks with key creditors, as participants keep changing, producing a revolving door effect. Key players Typical secondary debt participants include hedge funds, vulture funds, special situation funds, private equity ( PE) funds and pension funds. They trade in secured or unsecured debt, bank or bond debt, or trade claims......