Insolvency Bitesize

Welcome to the latest edition of Insolvency Bitesize. 

The clamour around Brexit continues to dominate the headlines and the noise around a possible global downturn coming our way is increasing. Finding clarity in the direction of English insolvency law is of course always tricky amid the interplay of competing legislative priorities and the wide-range of stakeholder interests. But as summer drifts into autumn, are there any clear signs as to where UK insolvency law is going? Possibly not:

• Standing still: The start of summer was marked by the Supreme Court’s decision to refuse permission to appeal the Court of Appeal decision in the Azeri Bank case. This means that the 19th century rule in Gibbs - that English law debt may only be discharged under English law – remains good law. Status quo maintained.
• Stepping back: The Government has confirmed that HMRC will once more take its position as a preferential creditor in the insolvency waterfall. From April 2020, HMRC priority claims will include PAYE, employee NICs and VAT. Unlike the last time HMRC had preferential status, there will be no cap on the age of tax debts eligible for preferential status. A step back.
• Looking ahead: Major reform to UK corporate insolvency is on the cards. Whether the current Government can survive long enough to enact the changes, whether any new Government would adopt them in its place or what form any legislation might take, remains to be seen. And we’re yet to hear what the Insolvency Service intends to do with pre-packs. Still, a (potential) step forward.

With boundaries having been pushed in the use by retailers of CVAs to deal with their unprofitable store portfolios, challenges currently before the courts could, if successful, strike at the heart of the procedure’s ability to compromise rent claims. As we’ve said before, CVAs are a symptom – not the cause – of retail woes and can serve a useful purpose. If neutered, would our toolkit be better or worse off?

Against this backdrop, it would be easy to overlook some of the less “shouty” legal developments of the last few months. But that would be a mistake. The types of cases we’ve been seeing will surely increase in an environment where recoveries are under threat, high asset values are under pressure and existing legal technology is being applied in novel ways. Challenges to distressed disposals and security, disputes against administrators for alleged misconduct or concerns around procedural compliance – they may not be headline news, but they are a sign of what’s to come.

So we take a look at some of these themes in this latest edition of Insolvency Bitesize which you can navigate below

As ever, if you have any comments on this edition of Insolvency Bitesize, please get in touch.