Legal Practice Notes

Appeals—the general position in litigation Appeals in litigation fall under CPR 52 and its practice directions: CPR PD 52A, CPR PD 52B, CPR PD 52C, CPR PD 52D and CPR PD 52E. In broad terms, the relevant practice directions cover the following: CPR PD 52A sets out general provisions concerning appeals CPR PD 52B addresses appeals in the County Court and the High Court CPR PD 52C deals with appeals in the Court of Appeal CPR PD 52D relates to statutory appeals and those subject to special provision CPR PD 52E concerns appeals by way of case stated Grounds for appealing An appeal will only be permitted where the appeal court is satisfied that the lower court’s decision was either wrong, or unjust due to a serious procedural or other irregularity in the lower court...

This Practice Note examines the annulment of bankruptcy orders under section 282 of the Insolvency Act 1986 ( IA 1986), together with the grounds upon which an annulment application can properly be based. For further reading on the steps for applying to annul a bankruptcy order, see Practice Note: The process of annulling a bankruptcy order. The effect of a bankruptcy order being annulled The annulment of a bankruptcy order restores matters to the position that existed before the order was made, because the order is cancelled in effect. Consequently, the debtor remains liable in full for every bankruptcy debt, while any property that had vested in the trustee in bankruptcy passes back to the debtor accordingly. Any sale or other disposition of property forming part of the bankruptcy estate by the official receiver or the trustee in bankruptcy before the annulment of the...

A bankrupt is discharged from bankruptcy one year after the bankruptcy begins, unless the court suspends that discharge because the bankrupt has failed to co-operate with the official receiver ( OR) or the trustee in bankruptcy (trustee) ( IA 1986, s 279). On discharge, the disqualifications and restrictions that apply to an undischarged bankrupt come to an end. For further detail on those disqualifications and restrictions, see Practice Note: The immediate effects of a bankruptcy order on the bankrupt. What is the bankruptcy restrictions regime and why was it introduced? In cases where bankruptcy is not the product of honest misfortune, but arises from the bankrupt’s misconduct or recklessness, it is regarded as appropriate that the bankruptcy disqualifications and restrictions should continue for longer than one year, to protect the public interest and act as a deterrent. Accordingly, the Enterprise Act 2002 ( En A 2002)...

Debt securities, including bonds, medium-term notes and commercial paper, are financial instruments that evidence indebtedness. For further information, see Practice Notes: Key features of the debt capital markets and Types of debt securities. This Practice Note reviews some of the forms that debt securities may take and sets out the meanings of, and distinctions between: a definitive security and a global security, and a global security in bearer form and a global security in registered form The emphasis of this Practice Note is on the principal features of global debt securities and the structures used for global notes. It should be read together with Practice Note: Form of debt securities—definitive securities, which explains the key features of definitive securities. What are the differences between global securities and definitive securities? In principle, debt securities can be issued in either definitive form or global form. In practice, all debt...

This Practice Note offers practical guidance on executing simple contracts and deeds by third-party individuals or bodies corporate (chiefly companies formed under the Companies Act 2006 ( CA 2006)) acting pursuant to a power of attorney, and outlines how such parties should sign in this context. It considers the following: who can grant a power of attorney, who can act as an attorney, the formalities for executing simple contracts or deeds under a power of attorney. It does not cover: the execution of powers of attorney themselves (see Precedent: Power of attorney for commercial transactions); the execution of documents by other authorised signatories of organisations (see Practice Note: Executing documents—deeds and simple contracts). We have created a comprehensive, interactive collection to help users identify and work through the concepts and common issues when executing documents. Each section or phase contains practical guidance, precedent clauses and Q& As relevant to that section, helping users work...

The Corporate Insolvency and Governance Act 2020 ( CIGA 2020) CIGA 2020 emerged as part of the government’s measures addressing the economic shock of the coronavirus ( COVID-19) crisis. Alongside other changes, it added fresh provisions to the Insolvency Act 1986 ( IA 1986), aimed at keeping supplies flowing to companies facing financial distress and finding it hard to pay their supplier, and at curbing the exercise of certain contractual rights in agreements for the sale and supply of goods when insolvency occurs. CIGA 2020 carries notable consequences for the construction sector. The rules most likely to affect participants in construction contracts are the limits on a supplier’s ability to terminate, or to do ‘any other thing’, where the customer has become insolvent, under IA 1986, s 233B (brought in by CIGA 2020, s 14). Within a construction setting, the customer for these CIGA 2020 rules will be...

Applicable law for directors' duties Post Brexit, in those Member States to which Regulation ( EU) 2015/848 ( OJ L141 5.6.2015 p 19), the Recast Regulation on Insolvency [ EU Recast Regulation on Insolvency], applies, the long-standing assumption that a company’s registered office reflects its centre of main interests ( COMI) can be displaced in practice, in reality. In such circumstances, the duties of that company’s directors may fall to be determined by the applicable law under the EU Recast Regulation on Insolvency (ie the law of the lex concursus; where main proceedings are opened) rather than the domestic law of the country of the registered office, which they are likely to be more familiar with. Accordingly, it is crucial to recognise the differing duties and standards that operate across Europe (see Practice Note: Table comparing European directors’ duties)......

A fraudulent trading claim can proceed via two distinct statutory avenues: it constitutes a criminal offence under section 993 of the Companies Act 2006 ( CA 2006) a civil remedy is available under sections 213 and 246ZA of the Insolvency Act 1986 ( IA 1986) This Practice Note addresses the latter. What is fraudulent trading? Fraudulent trading is a cause of action under IA 1986, s 213 (liquidation) or IA 1986, s 246ZA (administration), aimed at recouping value for the company's estate where: the company has been placed into winding up or entered administration, and any part of its business was conducted with intent to defraud the company's creditors or the creditors of any other person, or for a fraudulent purpose In such circumstances, mere negligence or incompetence does not suffice. Who can commence a fraudulent trading claim? Historically, only a liquidator could issue a fraudulent trading claim. However, from 1 October 2015 both...

Introduction The Cross- Border Insolvency Regulations 2006 ( CBIR 2006), SI 2006/1030, give effect specifically in England to the UNCITRAL Model Law on Cross- Border Insolvency and also expressly state that foreign main or foreign non-main proceedings can be commenced (see Practice Note: When does UNCITRAL (implemented by the Cross- Border Insolvency Regulations) apply and what are the effects?).......

Summary This Practice Note outlines the position of Financial Support Directions ( FSDs) under the Pensions Act 2004 ( PA 2004), with a particular focus on how FSD liabilities rank in insolvency, as clarified by the Supreme Court in Nortel/ Lehman. The ruling offers key guidance on: the priority of FSD liabilities on an insolvency the correct interpretation of the Insolvency ( England and Wales) Rules 2016 ( IR 2016), SI 2016/1024, r 14.1 (previously the Insolvency Rules 1986 ( IR 1986), SI 1986/1925, r 13.12(1)(b)), which defines contingent debts provable in an insolvency the character of insolvency expenses the extent, if any, of the court’s residual discretion to order payments outside the statutory distribution regime The decision also addressed the treatment of contribution notices issued under PA 2004, s 47 (section 47 CNs), which serve to enforce...

The nature of disclaimer Disclaimer is a statutory mechanism arising under the Insolvency Act 1986 ( IA 1986) together with the Insolvency ( England and Wales) Rules 2016 ( IR 2016), SI 2016/1024, which regulate it as follows: in liquidation, the relevant provisions are set out in IA 1986, ss 178–182 and in IR 2016, SI 2016/1024, rr 19.1–19.11 in bankruptcy, the relevant provisions are set out in IA 1986, ss 315–321 and in IR 2016, SI 2016/1024, rr 19.1–19.11 What can be disclaimed? Both liquidators and trustees in bankruptcy (trustees) may, by giving the prescribed notice, disclaim any onerous property, and may exercise that power notwithstanding that they have already taken possession of it, endeavoured to sell it, or otherwise exercised rights or incidents of ownership in relation to it. Onerous property is defined as including: any contract that is...

Applicable legislation As amended, the Insolvent Partnerships Order 1994 ( IPO 1994), SI 1994/2421, provides that IR 2016, SI 2016/1024, “as from time to time in force”, applies to insolvent partnerships, subject to whatever modifications are needed by the circumstances to give effect to IA 1986 and the Company Directors Disqualification Act 1986 ( IPO 1994, SI 1994/2421, Art 18 and Sch 10) (see Practice Note: Partnerships and the disqualification regime). Before 8 December 2017 (and taking account of the transitional and savings provisions in the Insolvency ( Miscellaneous Amendments) Regulations 2017), IPO 1994 stated that IR 1986, SI 1986/1925, “as from time to time in force”, applied to insolvent partnerships. That formulation indicates that, save as noted below, the wide-ranging changes to IR 1986 introduced by the Insolvency ( Amendment) Rules 2010 with effect from 6 April 2010, also applied to...

FORTHCOMING DEVELOPMENT: On 11 February 2019, the Department for Work and Pensions ( DWP) issued its response to the consultation ‘ Protecting Defined Benefit Pension Schemes— A Stronger Pensions Regulator’, which followed the government’s White Paper ‘ Protection Defined Benefit Pension Schemes’ (19 March 2018). Among other measures, the government proposed working with TPR and the PPF to convert the FSD procedure into a single-stage approach, under which the Determinations Panel would impose a specified form and amount of enforceable financial support on a target. It also confirmed the regime would be retitled Financial Support Notice ( FSN). The regime’s reach would be widened to include individual controlling shareholders of the sponsoring employer. The government would likewise pursue the plan to broaden the potential targets of FSD enforcement activity to ensure pension promises are fulfilled. In addition, it signalled an intention to replace the...

A company can be struck off under Part 31 of the Companies Act 2006 ( CA 2006) in two ways: voluntarily, initiated by the company’s directors; or by the registrar of companies using its statutory strike off powers. In brief, the registrar of companies possesses four distinct powers to strike off a company: authority to strike off a defunct company; a duty, together with power, to strike off a company that is being wound up; power to strike off a company registered on false pretences; and power to strike off a company that lacks an appropriate registered office address. This Practice Note outlines each of the registrar’s powers to commence a strike off. For guidance on how a company may apply for voluntary striking off, see Practice Note: Voluntary striking off and...

ARCHIVED: This Practice Note was archived and is not maintained. Enforcement is a key area governed by the intercreditor agreement. This note covers: the circumstances in which mezzanine lenders are typically able or unable to commence enforcement action matters concerning any mezzanine option to purchase provision, and when each class of creditor generally holds control over the enforcement strategy The note also flags the issues most frequently negotiated in each of these areas. For an overview of the various provisions included in intercreditor agreements, see Practice Note: Introductory guide to Intercreditor Agreements, and for an introduction focused on senior/mezzanine intercreditor arrangements, see Practice Note: Senior/mezzanine creditor intercreditor issues—introduction [ Archived]. For a simple-form intercreditor agreement with accompanying drafting notes, see Precedent: Intercreditor deed—single company borrower—single secured senior lender—single secured junior lender—single unsecured subordinated lender. Further detail on payment controls and...

It is usual for parties to a facility agreement to seek changes to its provisions, often more than once, over the term of the facilities. They might, for instance, look to push back the repayment date or raise the amounts available so the borrower can finance another scheme or acquisition. The lender may take the opportunity of an increase to the facilities to implement other amendments to the papers, such as a higher interest rate or further undertakings. These adjustments can be recorded by an amendment letter, an amendment and restatement agreement, or at times by issuing a fresh facility letter or agreement intended to supersede the earlier version. For guidance on the process of amending a facility agreement, see Practice Note: Amending a facility agreement. Where the lender is to benefit from guarantees or third party security (see Practice Note: Third party...

What is a derivative? A derivative is a financial contract whose value is linked to an underlying asset, index, rate, or other reference measure. Settlement may involve the physical delivery of the underlying from one party to another, or a cash amount computed by reference to the relevant asset, index, rate, or benchmark. Derivatives can be used either to curb exposure to a chosen variable or to obtain exposure to that variable. Put simply, a derivative has its own legal form and price, yet that price is separate from, and derived from, the value of the applicable underlying asset, index, rate, or reference point. Participants commonly include: Banks and investment firms Corporates Governments and local authorities Supranational authorities High net worth individuals and retail investors These instruments are mainly traded in wholesale markets, although certain derivative products are also entered into by high net...

Practice Note on governing law and jurisdiction in finance transactions This Practice Note examines governing law and jurisdiction within finance transactions. It covers: the meaning of governing law and jurisdiction governing law in depth, including how the chosen law is identified jurisdiction in depth, including rules used to decide jurisdiction governing law clauses in finance deals and instances where English law may not suit jurisdiction clauses in finance deals, and factors when choosing exclusive, non-exclusive or asymmetric jurisdiction service of process and process agents arbitration clauses Further guidance appears in these Practice Notes: Applicable law—a guide for dispute resolution practitioners Jurisdiction—a guide for dispute resolution practitioners What is meant by governing law and jurisdiction? Governing law and jurisdiction are distinct concepts. Governing law The governing law (also called the applicable law) is the body of law a court applies to...

This Practice Note outlines the principal issues to take into account when altering an existing facility agreement. It covers: typical drivers and rationales for changing a facility agreement key considerations when amending a facility agreement in the context of a bilateral or syndicated transaction matters to address where guarantees or security are in place ways to document an amendment, including whether to use an amendment letter, an amendment agreement, or an amendment and restatement agreement usual conditions precedent to effectiveness points concerning fees, costs and expenses This Practice Note does not address one-off waivers and consents. For further information on waivers and consents, see Practice Note: Waivers and consents. For material on amending security documents, see Practice Note: Amending security documents. For general contract law guidance on varying a contract, see Practice Note: Contract...

This Practice Note reviews the Hague Convention on Choice of Court Agreements, which governs both jurisdiction and the recognition and enforcement of judgments. It outlines the scope of the Hague Convention on Choice of Court Agreements and the need for an international case anchored by an exclusive choice of court agreement. It also examines issues lying outside the Convention’s reach, whether by specific exclusions within the text or through declarations made by contracting states. The Practice Note considers how the Hague Convention on Choice of Court Agreements applies in the UK. An explanatory report on the Hague Convention on Choice of Court Agreements by Trevor Hartley and Masato Dogauchi supplies detailed commentary on each article. When did the Convention come into force? The Hague Convention on Choice of Court Agreements was concluded on 30 June 2005 and was first ratified by Mexico, followed by the EU. In...