Legal Practice Notes

This Practice Note explains when a validation order should be sought and sets out the steps to be taken. Why might an application for a validation order need to be made? Under section 127 of the Insolvency Act 1986 ( IA 1986), any disposition of a company’s property after the start of a winding up is void. Examples of dispositions include: payments from a bank account; on learning of a winding-up petition, a bank will often freeze the account, preventing trading payment of wages, salaries and other routine day-to-day expenditure by the company disposal of a company asset, for example a land transaction Whether or not the disposition is at full market value is immaterial: it may still fall within IA 1986, s 127. Although IA 1986, s 127 renders void dispositions of the company’s property after winding up has commenced, this does not extend to...

The official receiver ( OR) is designated as trustee in bankruptcy (trustee) or as liquidator to manage and investigate every bankruptcy and court-ordered winding up, including those of partnerships. The Secretary of State or the creditors may, in place of the OR, appoint an insolvency practitioner ( IP) to act as trustee for personal insolvencies or as liquidator for corporate cases. Under the Insolvency Regulations 1994, SI 1994/2507, as amended (the Regulations), the OR or IP, as appropriate, is obliged to pay into the ( ISA) any funds they receive while administering all bankruptcies and compulsory liquidations. Before 1 October 2011, sums from voluntary liquidations could also be lodged in the ISA; now, only unclaimed dividends in a voluntary liquidation may be paid into the ISA. Likewise, unclaimed dividends arising in an administration or an administrative receivership may be paid into the ISA once the...

Background to the Volcker Rule and implementation US regulators signed off regulations arising from the so‑called Volcker Rule elements of the Dodd‑ Frank Wall Street Reform and Consumer Protection Act 2010 ( Dodd‑ Frank) on 10 December 2013, and the rules then came into force on 1 April 2014. At its core, the Volcker Rule removes the capacity of US banks to deal as principal in particular trading or investment fund‑related activities. The final rule also provided a conformance window running until 21 July 2015, allowing banking entities time to come into compliance with its prohibitions on proprietary trading and on covered fund ownership and sponsorship, as set out in the rule. General requirements of the final rule Section 619 of Dodd‑ Frank inserted a new section 13 into the Bank Holding Company Act of 1956 ( BHC Act). Under that section, in general terms, any...

This Practice Note sets out essential tips for advising a client weighing a liability management transaction. Amid recurring market swings, issuers across numerous sectors periodically assess options such as debt buy-backs, tender or exchange offers, and consent solicitations. Such transactions enable an issuer to refinance or reorganise outstanding obligations and, in certain circumstances, to satisfy accounting, regulatory, or tax aims. The potential advantages can be considerable, ranging from signalling confidence to the market to avoiding more drastic measures. Extending debt maturities Recognising an accounting gain Deleveraging Securing possible regulatory capital benefits Enhancing financing flexibility Potentially forestalling a deeper restructuring or bankruptcy Demonstrating a positive outlook in an uncertain market environment Selecting the most suitable liability management route is critical, requiring issuer and counsel to weigh multiple considerations, as outlined below. Deciding between repurchases, tender or exchange offers, and consent solicitations will turn on the issuer’s objectives,...

This Practice Note explores the implications of the US Supreme Court’s decision in Harrington v Purdue Pharma LP, 144 S. Ct. 2071 (2024), which struck down the availability of non‑consensual third‑party releases, for the recognition and enforcement of those releases in Chapter 15 proceedings. Although the Purdue ruling still bars such releases in US Chapter 11 matters, numerous foreign insolvency regimes authorise non‑consensual third‑party releases. Before Purdue, US bankruptcy courts in Chapter 15 routinely and consistently recognised and enforced foreign proceedings and plans containing non‑consensual releases (see Practice Note: US Chapter 15 overview). After Purdue, Chapter 15 courts have, in practice, largely continued this approach, where justified under sections 1521 and 1507 of the Bankruptcy Code, applying comity and Chapter 15’s objectives, though some courts have more closely reviewed efforts to broaden relief beyond what the foreign court approved. This Practice Note...

This Practice Note does not claim to cover the full scope of relief that might be secured by a foreign representative, nor every intricacy that can arise in multi‑jurisdictional insolvency situations. Because Chapter 15 matters are profoundly fact‑dependent and turn in large measure on the foreign jurisdiction’s insolvency framework, as well as how closely it aligns with the Bankruptcy Code, Chapter 15 jurisprudence—and the relief available to a foreign representative—continues to develop. The Practice Note sets out Chapter 15 as follows: Chapter 15 background Chapter 15 key terms and concepts Chapter 15 synopsis Chapter 15 background Comity Comity is the foundational legal doctrine that underpins Chapter 15. It is not a rigid concept; its reciprocal character and political dimensions render its boundaries flexible and, at times, uncertain. Nevertheless, it is a doctrine that the diligent Chapter 15 lawyer must...

Debtor-in-possession ( DIP) financing involves a debtor arranging, typically on a secured basis, a loan from one or more lenders to keep the business running through its bankruptcy. Ready access to cash is essential: the debtor must pay staff, obtain required inventory, satisfy rent, meet professionals’ fees arising in the case, and discharge ordinary course liabilities. The bankruptcy court must authorise any unsecured post‑petition borrowing outside the ordinary course that is to be treated as an administrative expense (see 11 U. S. C. § 364(b)), as well as any post‑petition financing secured by estate property (see 11 U. S. C. §§ 364(c)–(d)). This Practice Note offers counsel an in‑depth analysis with practical tips on the key elements and issues of DIP financing, including: Parties to a DIP financing Obtaining credit under section 364 of the Bankruptcy Code Court approval of DIP...

ARCHIVED: This Practice Note is archived and is not being maintained. Transactions outside the ordinary course require court approval under section 363(b). Under Section 363(f), a debtor may transfer assets free and clear of liens and interests when certain conditions are satisfied. Frequently, assets are disposed of via a public auction, with debtors taking various steps to obtain court approval, including, among other things, entering a stalking horse agreement, setting bid procedures, and running an auction process, among other steps. Sales can also proceed through a plan of reorganisation, but the debtor must satisfy the confirmation requirements to secure the court’s approval. This Practice Note considers the Section 363 Sale requirements, approaches to selling assets in a bankruptcy case, and the distinctions between bankruptcy sales and sales conducted outside of bankruptcy, as follows: Section 363...

ARCHIVED : This Practice Note has been archived and is no longer maintained. Updated for the UK by the Practical Guidance Team. Chapter 7 offers debtors a fresh beginning after setback. That restart differs for an individual and a company under Chapter 7. In particular, only an individual debtor is eligible for a discharge of debts in a Chapter 7 case—there is no equivalent discharge available to business debtors in a Chapter 7 proceeding (see 11 U. S. C. § 727(a)(1); Fed. R. Bankr. P. 4004(c)(1)( A)). Business debtors instead achieve relief from obligations through winding up or dissolution (see Collier on Bankruptcy P 727.01). Distinct from proceedings under other parts of the Bankruptcy Code, a Chapter 7 case places a trustee in charge of the debtor’s property, who sells the assets and allocates the proceeds to creditors pursuant to the Code’s priority and...

Banking regulation— USA— Q& A guide This Practice Note provides a USA-specific Q& A overview of banking regulation, featured in the Lexology Getting the Deal Through series by Law Business Research (law as at 30 January 2023). Authors: Debevoise & Plimpton— Gregory J Lyons; Alison M Hashmall; Chen Xu. 1. What are the main governmental and regulatory policies that oversee the banking sector? Because of their significance to the US economy, banking organisations are among the most intensively regulated institutions in the United States. In broad terms, public policy and supervisory frameworks concentrate on two key areas: protecting the safety and soundness of banking organisations; and advancing economic and social aims, including keeping banking and commerce separate. On the first theme, banking organisations are governed by an extensive body of laws, regulations and policies that restrict their activities. Whereas a typical US...

Section 6 of the Company Directors Disqualification Act 1986 Section 6 of the Company Directors Disqualification Act 1986 ( CDDA 1986) sets out that the court must make a disqualification order against a person where, on an application under that section, it is satisfied that: they are, or have been, a director of a company that has at any time become insolvent, or has at any time been dissolved without becoming insolvent (whether while they were a director or afterwards); and their conduct as a director of that company (assessed on its own or alongside conduct in one or more other companies or overseas companies) makes them unfit to be concerned in the management of a company. For these purposes, a company is treated as insolvent if: it goes into liquidation when its assets are insufficient to pay its debts and other...

This Practice Note highlights principal authorities and related materials on contesting an administrator’s management of a company under paragraph 74 of Schedule B1 to the Insolvency Act 1986 ( IA 1986), where it is said the administrator is acting, has acted, or proposes to act in a manner that unfairly prejudices the interests of a member or creditor. The cases are arranged by topic and cover: the applicants management of administration unfair harm relief For further reading on this subject, see Practice Note: Challenges to administrators—action for unfair harm. The applicants Names of parties: Loveridge v Povey; Loveridge v Loveridge [2024] EWHC 329 ( Ch), [2024] All ER ( D) 110 ( Feb) Judgment date: 16 February 2024 Case summary: A company member will lack standing to bring the application where, in view of a debarring order made in...

Text on obligations of directors of enterprise group companies in the period approaching insolvency: status Working Group V, UNCITRAL’s insolvency-focused body, approved the Model Law on Enterprise Group Insolvency ( MLEG) in 2018 at its 54th session in Vienna (10–14 December 2018). In 2019, the UN Commission on International Trade Law (the Commission) endorsed and adopted both the guide to enactment and the text on the obligations of directors of enterprise group companies nearing insolvency (the Directors’ Guide) at its 53rd session in New York (6–17 July 2019) (see A/74/17— Report of the United Nations Commission on International Trade Law fifty-second session (advance copy)). The Directors’ Guide adds an extra section to part four of the UNCITRAL Legislative Guide on Insolvency law, covering directors’ duties (see Practice Note: UNCITRAL guidance on directors' obligations in the period approaching insolvency). UNCITRAL encourages all states...

This Practice Note explains how a taxable person who has declared and remitted VAT on a supply, yet does not receive the price for that supply, can seek a repayment, in full or in part, of the VAT paid. This covers cases where consideration is not in fact received. There are separate routes depending on the facts: where, after the time of supply, the supplier agrees to repay or reduce the price charged, the adjustment is dealt with under the credit note rules where the price remains unpaid (in whole or in part) and the supplier ultimately writes it off as irrecoverable, the claim is addressed under the rules on bad debt relief This Practice Note focuses mainly on the VAT bad debt framework, but, to set matters in context, it also gives a short outline of the credit note provisions explained above. EU law Under Council...

Practice Note Shifts in the economy can lead to sales of distressed debt portfolios. In such periods, banks commonly look to cut balance sheet exposure to underperforming companies or individuals, while private equity and similar funds pursue returns by buying these portfolios and then securing realisation or repayment of the underlying liabilities. This Practice Note sets out the tax considerations relevant to an acquisition of a distressed debt portfolio. For the purposes of this Practice Note, distressed debt is described as non-performing loans ( NPLs). NPLs may comprise, for instance, residential mortgage lending or corporate borrowings... Related Practice Notes debt restructurings (ie waivers, debt/equity swaps or renegotiations) enforcement of debts In addition, Tax and distressed debt—checklist of points to consider summarises the principal tax points to address when approaching distressed debt more generally......

The Supreme Court stands as the highest court of record in the UK. It: hears appeals raising arguable points of law of general public importance across the United Kingdom in civil cases, and for England, Wales and Northern Ireland in criminal cases decides devolution and compatibility matters, namely whether devolved executive and legislative authorities have acted, or propose to act, outside their powers, or have failed to meet a duty placed upon them considers references from lower courts or the law officers on issues tied to retained European Union law For further information, see Practice Note: Supreme Court—role, structure and powers—on or after 2 December 2024. Supreme Court Rules and Practice Directions The Supreme Court Rules 2024 ( SCR) took effect on 2 December 2024. They govern civil and criminal appeals to the Supreme Court, as well as appeals and references within the Court’s devolution and...

This Practice Note outlines the changes to the UK’s bank recovery and resolution framework introduced by the Bank Resolution ( Recapitalisation) Act 2025 (the Act). The Act extends to every institution to which the special resolution regime ( SRR) under the Banking Act 2009 ( BA 2009) applies. Accordingly, it captures banks, building societies and certain investment firms designated by the Prudential Regulation Authority ( PRA). For simplicity, this Practice Note groups these entities collectively as ‘banks’. Background to the Act Failure of Silicon Valley Bank Silicon Valley Bank ( SVB) was a US lender with a focus on technology. From July 2022, it operated in the UK via a distinct legal entity, Silicon Valley Bank UK Limited ( SVBUK). SVBUK was authorised by the PRA and, like any other UK bank, was dual-regulated by the PRA and the Financial Conduct Authority ( FCA). As a...

Rationale Securitisation is the transfer of sizeable portfolios of income‑generating assets to a special purpose vehicle ( SPV). The SPV finances the purchase price by issuing interest‑bearing securities—commonly termed ‘bonds’ or ‘notes’—into the capital markets. These securities benefit from security over the assets and/or the cashflows they produce (the ‘receivables’). Cashflows from the receivables are applied to pay interest and to repay principal on the securities. Types of receivables that can be securitised include: mortgage payments bank loan repayments lease/rental payments credit card repayments insurance premium payments Benefits of securitisation include: cheaper borrowing—the SPV may achieve a higher credit rating than the debtor company (originator). Either the obligors for the receivables carry a stronger rating than the originator, or credit rating agencies may find it simpler to rate a single asset (the receivables) rather than the...

This Practice Note offers a concise overview of the retail trading environment and signposts principal legal and practical challenges for office-holders appointed to a retail business. It also explores factors relevant to different restructuring routes, including ‘light touch’ administrations, company voluntary arrangements, and restructuring plans under Part 26A of the Companies Act 2006. For present purposes, it is assumed that any substantial retail insolvency will proceed by way of administration. By contrast, liquidation typically entails a close down with little or no ongoing trade, though several points below still apply and should be weighed when shaping appropriate strategies. Overview of the retail insolvency landscape Analysis of Companies House accounts undertaken by FRP in December 2024 identified more than 13,000 UK retail companies exhibiting signs of financial distress. This mirrors a prolonged spell of difficult operating conditions for retailers, intensified by—but...

This Practice Note sets out hot topics for restructuring and insolvency specialists. It is updated regularly with practical guidance and analysis that mirror recent changes and trends in the restructuring and insolvency market. To monitor the progress of key UK legislation (including Bills and Statutory Instruments ( SIs) in progress), regulation, professional standards and consultations relevant to these professionals, see Practice Note: Restructuring & Insolvency—horizon scanner. Liability Management Exercises ( LMEs) UK R& I practitioners are increasingly adopting informal restructuring tools—particularly LMEs, first pioneered in the US—to use flexibility within the original lending documentation (sometimes inadvertently allowed by lenders) to rework the capital structure, access additional and/or cheaper debt, or reduce leverage. LMEs are generally deployed to give debtor companies breathing space and to address liquidity strains caused by: shifting economic conditions rising costs (notably fuel and energy) new market...