Legal Q&A

Clare Ambrose, Twenty Essex The party’s representative should liaise with the witness and the other side. It should seldom be impossible to resolve matters by arranging for evidence to be given remotely. Such an approach is fairly standard practice......

Can the administrator sublet the property to the purchaser? An administrator may do whatever is necessary or expedient to manage the company’s affairs, business and property (paragraph 59(1) of Schedule B1 to the Insolvency Act 1986 ( IA 1986)), which also encompasses the powers set out in IA 1986, Sch 1. In respect of subletting, IA 1986, Sch 1, para 17 confirms that an administrator has the power to grant or accept the surrender of a lease or tenancy of any company property, and to take a lease or tenancy of any property required or convenient for the company’s business. For further detail, see Practice Note: Roles, powers, functions and duties of an administrator, particularly the section ‘ The administrator’s powers’......

When one company advances funds to another, the contractual provisions govern any restriction on repaying the loan before the ten-year period first contemplated. Should the lending company enter liquidation or administration, that circumstance, by itself, does not alter the contract’s terms. The office-holding insolvency practitioner should nevertheless review the agreement to determine whether it permits earlier repayment, or repayment on alternative terms, if the lending company goes into liquidation or administration. Although that may appear improbable, it remains possible, and the officeholder ought to explore every avenue to secure accelerated repayment of the borrowing. Absent an express clause to the contrary, the insolvency of the lender does not, of itself, accelerate the debt, and timing remains governed by the bargain. It would seem that the office-holding insolvency practitioner holds an appointment that must remain open for at least ten years before the loan can be...

This Q& A This Q& A explores the steps administrators should take to contest a landlord’s attempt to forfeit a lease by peaceable re-entry, carried out unaware of an interim moratorium triggered by lodging a notice of intention to appoint administrators ( NOI). An NOI is to be lodged by the directors or the company in advance of making an out of court appointment pursuant to Schedule B1, paragraph 22, of the Insolvency Act 1986 ( IA 1986). This Q& A does not address a case where no NOI has been lodged. Where a company or its directors intend to appoint an administrator via the out of court route, they begin by filing an NOI, which imposes an interim moratorium under IA 1986, Sch B1, paras 44(2), 44(4). After the NOI is placed before the court, notice must also be served on the...

Do the normal set-off rules apply to an LLP in administration? The Limited Liability Partnerships Act 2000 ( LLPA 2000) created limited liability partnerships ( LLPs) and is intended to be considered alongside the Limited Liability Partnership Regulations 2001 ( LLPR 2001), SI 2001/1090. Through these Regulations, the Insolvency Act 1986 ( IA 1986) and the Insolvency ( England and Wales) Rules 2016 ( IR 2016), SI 2016/1024 are applied to LLPs accordingly......

In partnership with Alexander Stewart of Hogarth Chambers If a limited liability partnership ( LLP) becomes insolvent, the preferred view is that members’ entitlements to amounts due under their capital and current accounts are subordinated to the claims of external unsecured creditors. That said, it can be contended that members’ claims for advances or loans made to the LLP—despite being entered in their current accounts—stand on the same footing as those of external unsecured creditors. LLPs are established by the Limited Liability Partnerships Act 2000 ( LLPA 2000). In several respects, including insolvency, LLPs are akin to limited companies rather than partnerships; see: Limited liability partnerships ( LLPs) and insolvency—overview. Where an LLP is insolvent, it is terminated by voluntary or compulsory winding-up. The winding-up regime under the Insolvency Act 1986 ( IA 1986) operates alongside LLPA 2000, s 14 and the Limited...

As a broad principle, nothing bars a creditor from setting any supply preconditions they consider suitable, save for statutory carve-outs (typically concerning consumer credit, public policy, and unlawfulness). Acceptance of those preconditions by a third party (in your scenario an individual or another business) rests on commercial bargaining, and will be agreed or declined through negotiation between parties. See: Guide to dealing with a distressed business—overview, and Practice Note: A creditor’s guide to dealing with a company in financial difficulty......

Insolvency Rules 2016 ( IR 2016), SI 2016/1024, Part 14 Part 14 of the Insolvency Rules 2016 ( SI 2016/1024), which sets out how creditors’ claims are dealt with, also operates in a members’ voluntary liquidation ( MVL) by reason of r 14.1(1). That rule confirms that this Part applies to administration, winding up and bankruptcy proceedings, without any restriction confining its operation to insolvent liquidations. What amounts to a provable debt in a winding up (and equally in administration and bankruptcy) is defined by r 14.2(1). Save as otherwise provided in that rule, every creditor’s claim is provable as a debt against the company or the bankrupt, whether the liability is present or future, certain or contingent, ascertained or recoverable only in damages. For further guidance, see Practice Note: Future debts, contingent debts, secured debts......

Can a claim be made against a company for trading whilst insolvent? Wrongful trading There is no standalone claim triggered merely by a company ‘trading whilst insolvent’, even though that phrase is commonly used. What is usually intended is a ‘wrongful trading’ claim. This cause of action arises under section 214 of the Insolvency Act 1986 ( IA 1986) and, at present, applies only where a company has gone into an ‘insolvent liquidation’. IA 1986, s 214(6) defines this as the company entering liquidation at a time when its assets are insufficient to meet its debts, other liabilities, and the expenses of the winding up. The key point is that a wrongful trading claim can only be brought by the company’s liquidator; it is not a claim that a creditor may advance against a company, whether or not insolvency proceedings are on foot. The claim is...

The nature of joint and several liability As outlined in the Practice Note on joint, several, and joint and several liability, joint and several liability arises when two or more parties to the same contract give a promise to the same person, while, at the same time, each of them separately makes that identical promise to that same person, within the same contractual arrangement......

Clare Ambrose, Twenty Essex The clear benefit is that the hearing can proceed and the dispute be determined, which is the tribunal’s fundamental objective. The tribunal’s obligation to be fair to both sides does not compel an in-person hearing; if suitable arrangements permit the hearing to happen, that will be a weighty factor in favour. There is also a possible gain in cost efficiency: although premium technology may incur expense, savings on hearing venues and travel and hotel accommodation could be substantial. Virtual hearings remain relatively novel, so practice is evolving to manage practicalities and logistics across the board. The range of technological solutions is broad and warrants careful review and thorough investigation by the parties involved. For the hearing to run smoothly, every participant in the arbitration should trial their equipment in the precise location from which their virtual hearing will (for each of them) be...

Section 283 of the Insolvency Act 1986 ( IA 1986) In general terms, section 283 states that every asset belonging to the bankrupt, or in which the bankrupt held an interest on the date the bankruptcy order was made, forms the bankruptcy estate. Under IA 1986, s 306, that estate vests in the trustee in bankruptcy (trustee) immediately and automatically on appointment, and stays vested until the trustee deals with it, typically by sale—see Practice Note: What assets vest in the trustee in bankruptcy and what steps does the official receiver or trustee in bankruptcy need to take? Where the estate includes land or a beneficial interest in land, the trustee should ensure that the correct entries are or become noted against the title, whether the title is registered or unregistered. Depending on whether the property is owned solely or jointly, certain entries may (or...

The provisions relating to notices of sums in arrear ( NOSIAs) Sections 86B–86D of the Consumer Credit Act 1974 ( CCA 1974) set out the rules on notices of sums in arrear ( NOSIAs). CCA 1974, s 86B deals with NOSIAs for fixed-sum credit agreements, etc, and CCA 1974, s 86C deals with NOSIAs for running-account credit agreements......

Are business rates payable? In England and Wales, liability to business rates turns on occupation. Commercial premises in occupation attract the full charge, while empty premises may escape liability where an exemption applies. Occupied commercial property is charged at the full rate without reduction. One such relief covers a non-domestic hereditament that is either the subject of a winding-up order under the Insolvency Act 1986, or is being wound up voluntarily under that Act. The legal basis is the Non- Domestic Rating ( Unoccupied Property) ( England) Regulations 2008, SI 2008/386, reg 4(k). When is a property occupied? A company will be rateable as the occupier only if it is in ‘actual possession’ and exercises a ‘sufficient measure of control to prevent strangers from interfering’. Both elements are required to establish rateable occupation status......

In this Q& A, we assume that B’s claim is smaller than A’s. Legal process against the company Under paragraph 43(2) of Schedule B1 to the Insolvency Act 1986 ( IA 1986), the moratorium prevents any legal process—covering legal proceedings, execution, distress and diligence—from being started or continued against the company or its property without the administrator’s consent or the court’s permission. This wording is wide enough to encompass any remaining actions or steps that might otherwise be taken against the company or its property. Accordingly, B can only bring an action against A with the approval of the administrator or the leave of the court. The purpose of the moratorium (and the interim moratorium) is to safeguard the company and its assets from creditor action during the company’s administration and the pre-appointment period. It bars any steps, actions or processes from being begun or carried on...

Where a lease is silent, items left at the premises after expiry of the term remain owned by the tenant (or any other third-party owner). The landlord, as a result, becomes an involuntary bailee of those items. This can create difficulties for a landlord aiming to clear the space for re-letting or another purpose, and may involve additional expense. In particular, the landlord: cannot take or dispose of the items, and must act in a manner that is right and reasonable may face liability in conversion, or for wrongful interference with goods, if the items are sold, damaged or discarded These exposures can be managed by using the procedures in the Torts ( Interference with Goods) Act 1977 ( T( IG) A 1977), either by serving notice or asking the court for permission to sell the items. Serving notice is the route more often used in...

GDPR The General Data Protection Regulation ( GDPR), Regulation ( EU) 2016/679, sets out a framework that protects individuals in respect of the processing of personal data, whilst at the same time promoting the free movement of that data. The Data Protection Act 2018 incorporates the GDPR into the law of England and Wales. Accordingly, it applies to the handling of data within insolvency proceedings in this jurisdiction. For comprehensive information and an overview of the GDPR regime, see: UK data protection law collection. GDPR and Insolvency Proceedings As noted in the question, section 312(2)(b) of the Insolvency Act 1986 ( IA 1986) imposes a duty on the prior trustee in bankruptcy to deliver property and records to the new trustee in bankruptcy. It is important to recognise that this obligation has serious consequences, and a failure to comply amounts to contempt of court......

This is a ‘new’ lease under the Landlord and Tenant ( Covenants) Act 1995 ( LT( C) A 1995) Accordingly, it is presumed that the former tenant remains liable for arrears pursuant to an authorised guarantee agreement ( AGA) (in relation to which, see Practice Note: Lease covenants—liability after assignment of a lease or its reversion), and that liability is subject to the provisions of LT( C) A 1995, s 17 (which has been confirmed as not relevant to this Q& A; if required, see Practice Note: Former tenants, guarantors and overriding leases). Upon discharge, the bankrupt is released from all bankruptcy debts under section 281 of the Insolvency Act 1986 ( IA 1986)......

STOP PRESS From 6 April 2017, the Insolvency Rules 1986 ( SI 1986/1925) were revoked and superseded by the Insolvency ( England and Wales) Rules 2016 ( IR 2016) ( SI 2016/1024). The material in this Q& A may have been impacted by this amendment. Service out of the jurisdiction Under rule 6.14(6) of the Insolvency Rules 1986 ( SI 1986/1925) ( IR 1986), a bankruptcy petition can be served beyond England and Wales, but only with the court’s leave, and the court may specify how service is to be carried out. For bankruptcy petitions, IR 1986, r 12A.20 states that Civil Procedure Rules 6 ( CPR) apply to serving court documents outside the jurisdiction, subject to any modifications directed by the court......

The Industrial and Provident Societies Act 1965 ( IPSA 1965) has been revoked. The Co‑operative and Community Benefit Societies Act 2014 ( CCBSA 2014) now regulates how registered societies are formed and run. Per CCBSA 2014, s 1(1)(b), ‘registered society’ covers, via CCBSA 2014, s 150, societies which, immediately before 1 August 2014, were registered or regarded as registered under IPSA 1965 at that time......