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Differences between restructuring plans, schemes of arrangement, and CVAs

Differences between restructuring plans, schemes of arrangement, and CVAs Part 26A restructuring plans The Corporate Insolvency and Governance Act 2020 (CIGA 2020) introduced a new restructuring tool, namely a Part 26A restructuring plan. Consultation responses and discussions with stakeholders persuaded the government of the benefits of modelling the restructuring plan procedure on that of schemes of arrangements. As well as familiarity, this had the advantage of providing a long-established and tested body of jurisprudence that courts are able to draw upon when dealing with certain aspects of restructuring plans and considering matters such as class formation (ie relevant scheme case law is applicable to certain provisions of the new restructuring plan procedure, see: Schemes of arrangement—overview). CIGA 2020 introduced a restructuring procedure that allows a company to bind all creditors or members, including junior (or senior) classes of creditors even if they vote against the plan, through the use of a cross-class cram down (CCCD) provision if certain conditions are satisfied (see Practice Note: Cross-Class Cram Down under a Part...

Summary checklist and timeline for transaction at an undervalue and preference claims by an administrator or liquidator

Summary checklist and timeline for transaction at an undervalue and preference claims by an administrator or liquidator Checklist and timeline This summary checklist and timeline is drafted from the perspective of a claim being commenced under sections 238 and/or 239 of the Insolvency Act 1986 (IA 1986) by either an administrator or a liquidator, and not by an assignee of any such claim. Step/action Time (days) Section/rule 1. Investigate the events and circumstances leading to the insolvency of the company and the matters giving rise to the claim(s) against the respondent(s) (who would typically be the recipients of the payments/transactions). This would include obtaining the company's books, records, accounting information/statements and bank statements, interviewing directors, former directors and any persons with information concerning the promotion, formation, business dealings, affairs or property of the company.It should be noted that when the office-holder threatens a claim against the respondents, the office-holder is at risk of losing the powers of investigation under IA 1986, ss 235–236 in respect of that claim....

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Role, powers, functions and duties of a liquidator

The role and functions of a liquidatorA liquidator must be a licensed insolvency practitioner and authorised by a recognised professional body.In basic terms, a liquidator’s function is to secure the assets of the company and ensure that they are realised and distributed to the company’s creditors and, if there is any surplus, to the company’s contributories. A liquidator must fulfil this function following the duties imposed and powers granted to them under the Insolvency Act 1986 (IA 1986) and the Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024.Liquidators have a duty to act in the interests of creditors and contributories generally and must exercise a high standard of care and skill. They must always act impartially and independently.A liquidator acts as an agent on behalf of the company, although in a somewhat different way to a standard agent in that this agent directs the principal as well as acts for it. The liquidator does not stand in the shoes of the company and the company assets do not...

The appointment of a provisional liquidator

This Practice Note gives guidance as to when and how to apply for the appointment of a provisional liquidator after the presentation of a petition but before the making of the winding-up order.Applying for the appointment of a provisional liquidatorThe appointment of a provisional liquidator under section 135 of the Insolvency Act 1986 (IA 1986) is very much an application of last resort and one that should only be made after careful consideration of all the relevant evidence and the possible cost consequences to the applicant:•the appointment of a provisional liquidator to a trading company is one of the most serious steps a court can take, since it is likely in many cases to have a terminal effect on the company’s trading life. See Revenue & Customs Commissioners v Rochdale Drinks Distributors•given the potential seriousness of the appointment of a provisional liquidator, in the case of a creditor’s petition, the petitioner must show as a threshold test that they were likely to obtain a winding-up order on the hearing of...

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Witness statement in support of a wrongful trading claim under sections 214 and 246ZB of the Insolvency Act 1986

Witness statement in support of a wrongful trading claim under sections 214 and 246ZB of the Insolvency Act 1986 While both liquidators and administrators can now bring wrongful trading claims under sections 214 and 246ZB of the Insolvency Act 1986, this Precedent is drafted from the perspective of a liquidator bringing such a claim. Applicant(s): [insert initials and surname] [insert number of witness statement eg 1st] Exhibit: [insert exhibit description] Date: [insert date of witness statement] CASE NO: [insert case number] [ IN THE HIGH COURT OF JUSTICE BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES INSOLVENCY AND COMPANIES LIST (ChD) OR IN THE HIGH COURT OF JUSTICE BUSINESS AND PROPERTY COURTS IN [insert location] INSOLVENCY AND COMPANIES LIST (ChD) OR IN THE COUNTY COURT AT [insert location] ] IN THE MATTER OF [insert company’s name] AND IN THE MATTER OF THE INSOLVENCY ACT 1986 BETWEEN [Insert name(s) of the aPPLICANT(s)]        Applicant(s) AND [Insert name(s) of the respondent(s)]        Respondent(s) [INSERT NUMBER] Witness statement of [Insert name...

Letter from an insolvency office-holder to any persons or companies with information, documentation or property relevant to the business, affairs, dealings and property of the insolvent entity or individual (sections 234–236 and 365–366 of the Insolvency Act 1986)

Letter from an insolvency office-holder to any persons or companies with information, documentation or property relevant to the business, affairs, dealings and property of the insolvent entity or individual (sections 234–236 and 365–366 of the Insolvency Act 1986) [insert name, address and contact details/reference of author] [insert date] To: [insert the name of the person or company to whom the letter is addressed] [insert the full address of the recipient] Dear [insert name of recipient] [insert the name of the insolvent company or the name of the bankrupt][(in liquidation) OR (in bankruptcy)] [(the 'Company') OR (the 'Bankrupt')] Case number: [insert case number if applicable] Our client: [insert name of client and office held] Request for [insert what the request is for ie property, information and/or documentation] concerning [the Company OR the Bankrupt] pursuant to [insert the applicable sections ie sections [234, 235 and 236 OR 365 and 366] of the Insolvency Act 1986 (IA 1986)] Introduction We act for [insert name of the office-holder], [the...

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Is it acceptable for a liquidator and the only creditor in an insolvency situation to be represented by the same solicitor? Or is this a conflict?

Is it acceptable for a liquidator and the only creditor in an insolvency situation to be represented by the same solicitor? Or is this a conflict? Both insolvency practitioners (IPs) and solicitors are members of professions that are governed by separate ethics codes. Both IPs and solicitors, before accepting an appointment or an instruction, should carry out documented procedures to ensure that there would not be a conflict of interest or breach of their ethics code in accepting the appointment or instruction. The question does not specify whether the conflict concerned would be for the solicitor or the IP and although both issues are considered, this answer deals primarily with the IP and whether the IP would have a conflict of interest. The insolvency ethics code sets out a framework approach that is to be followed in all cases to establish whether there is a conflict of interest. The IP should first of all assess whether there are any threats to the fundamental principles of integrity,...

Do the English property and assets of a dissolved overseas company pass to the Crown as bona vacantia?

Do the English property and assets of a dissolved overseas company pass to the Crown as bona vacantia? When a company registered in England and Wales is dissolved, all property and rights vested in or held on trust for it (including leasehold property) will be deemed bona vacantia (meaning ‘ownerless property’) at the date of dissolution and will vest in and belong to the Crown (or the Duchy of Lancaster or Duchy of Cornwall, as may be appropriate). The treatment of companies incorporated outside the UK (overseas companies) is dealt with in Part 34 of the Companies Act 2006 (CA 2006), which gives the Secretary of State power to make regulations to impose on overseas companies various registration, reporting and disclosure requirements. The two principal regulations dealing with overseas companies are: • the Overseas Companies Regulations 2009, SI 2009/1801 • the Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009, SI 2009/1917, as amended by the Overseas Companies (Execution of Documents and Registration of...

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Supreme Court confirms that section 213 of the Insolvency Act 1986 is not restricted to those involved in the management or control of the company’s business (Bilta (UK) Ltd (in liquidation) and others v Tradition Financial Services Ltd; Nathanael Eurl Ltd (in liquidation) and another v Tradition Financial Services Ltd)

The Supreme Court unanimously dismissed both appeals. Applying ordinary principles of statutory interpretation, the court affirmed that the language of section 213 of the Insolvency Act 1986 (IA 1986) does not restrict liability to those involved in the management or control of the company’s business such as directors or managers, but could very well apply to someone routinely transacting with the company in the knowledge that the company was carrying on a fraudulent business. In addition, the court held that where claimant companies had been struck off and then later restored to the register, the deemed existence of the claimant companies during the period in which they were in fact in dissolution did not necessitate assuming that they lacked directors or other officers during that time. That was a question of probability to be determined on the evidence: the burden of proof was on the claimant companies and they had failed to discharge it. Accordingly, the dishonest assistance claim remained time-barred. Andrew Westwood KC, barrister practising from Maitland Chambers, comments...

FTT finds that director loan was not written off or released on liquidation (Quillan v HMRC)

Tax analysis: In Quillan, the First-tier Tax Tribunal (FTT) allowed the taxpayer’s appeal, finding that his director loan account balance was neither written off nor released for the purposes of section 415(1) of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005) on the liquidation of the company, contrary to HMRC’s guidance on this area in its Company Taxation Manual.

View the latest UK Parliament Acts documents on Liquidator

143 General functions in winding up by the court

(1)     The functions of the liquidator of a company which is being wound up by the court are to secure that the assets of the company are got in, realised and distributed to the company's creditors and, if there is a surplus, to the persons entitled to it.(2)     It is the duty of the liquidator of a company which is being wound up by the court in England and Wales, if he is not the official receiver—(a)     to furnish the official receiver with such information,(b)     to produce