Insolvency – News and Legal Updates, December 2020

Pre-pack reform – help or hindrance for business rescue?

Pre-pack sales by administrators are often considered controversial when there is a sale back to the existing management. Following a pre-pack to a connected party, typically the business continues in some form, free of its debts, under the same management, and often then asks those who were left unpaid to trade with the new entity, while those same suppliers can expect pennies in the pound, if anything, in respect of what they are owed.

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Re Tokenhouse VB Limited

Failure to give chargeholder notice of intention to appoint did not invalidate administrator appointment - but replacement administrators appointed by the court.

The directors of Tokenhouse VB Limited (formerly VAT Bridge 7 Limited) appointed joint administrators without providing the company’s qualifying floating charge holder (the QFCH) with notice of their intention to do so

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Wrongful Trading

The temporary provisions suspending director liability for wrongful trading claims have been re-introduced to cover the period 26 November 2020 to 30 April 2021.

More information can be found in David Pomeroy's article here.

Protections extended for businesses

The temporary restrictions on the use of statutory demands and winding-up petitions has been extended until 31 March 2021, after the current period expires on 31 December 2020. Creditors with petitions which qualify for presentation in the interim must have regard to the Insolvency Practice Direction - as set out in Amy Gallimore and Iona Jones' article here.

The moratorium on landlord forfeiture of leases for non-payment has also been extended to 31 March 2021, matching the restrictions on CRAR which were already in place until that date.

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