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Insolvency - News and Legal Updates, November 2021

In this bulletin, we focus on the duties of office holders when dealing with the sale of properties. Cathryn Butler considers the duties of receivers and reflects on the recent decision in Serene Construction Ltd v Salata and Associates Ltd & Others; Olivia Reader and Amy Gallimore consider the duties of administrators and liquidators, noting the recent decision in Absolute Living Developments Ltd v DS7 Ltd; and Katie Farmer provides four practical tips for office holders dealing with the sale of properties. Separately, Ruby Holland provides an update on the increase in court fees, the easing of COVID insolvency measures and the debate over bounce back loans and the applicability of set off. 

Duties of receivers - Serene Construction Ltd v Salata and Associates Ltd considered

In light of a recent decision in which the court assessed the decisions taken by receivers when selling property, we revisit the powers and duties of receivers and the importance of obtaining independent valuation evidence and keeping records of decisions.

To read more click here.

Guarding against challenge on the sale of properties  – Four practical tips for office holders

Disgruntled borrowers and affected third parties are often quick to point the finger at receivers and other office holders for failing to obtain what they regard as the best price that could reasonably have been obtained. As a result, office holders can find their decisions and decision making processes under scrutiny several years after the relevant events.

To read more click here.

Duties of liquidators and administrators when undertaking the sale of properties

There have been a number of recent decisions which clarify the duties owed by liquidators and administrators when selling company property. We recap the key points for these office holders, contrast them with the duties of receivers, and consider what insights the latest authorities give us on the court’s approach to the duties of liquidators and administrators, particularly when faced with allegations of negligence or misconduct.

To read more click here.

Updates

The phasing out of certain temporary measures introduced during the pandemic has started. From 1 October 2021 until 31 March 2022 the criteria for creditors presenting winding up petitions will be restricted, to where:

  • The debtor owes the creditor at least £10,000:
  • The creditor has issued a written notice of the debt to the debtor, seeking payment proposals for the outstanding debt; and
  • The debtor has not made a payment proposal satisfactory to the creditor within 21 days of delivery of the written notice.

The new measures will continue to restrict commercial landlords from presenting winding-up petitions in respect of unpaid arrears due under commercial leases, unless the landlord can show that the non-payment is not down to the financial effect of Covid.

Bounce back loans and set off

Recent guidance as to the ethics surrounding whether directors should be advised to transfer cash balances (including potentially bounce back loans) to a designated client account in advance of liquidation to pay for the costs of the liquidation. R3 initially published FAQs following a webinar on Bounce Back Loans, in conjunction with the British Business Bank (BBB), The Insolvency Service and UK Finance. Its initial position on this question was that it may be inappropriate as it would deprive the bank from utilising a contractual right of set-off.

It has long been considered that taking control of the funds is generally more in line with the pari passu principle that all creditors should be treated equally. Further, to allow the bank to set-off the loan could mean there is no money available to meet the expense of the relevant insolvency proceedings which is arguably not in the interest of the creditors.

R3’s re-issued answer, along with the joint statement of the ICAEW, IPA, ICAS and CAI, acknowledges that it may be appropriate to transfer a credit balance, although makes it clear that RPBs expect IPs advising in the pre-insolvency period to carefully consider the appropriate step to take on a case by case basis in compliance with the insolvency Code of Ethics (including self-interest threat in particular on the issue of fees) and to document their decision-making.

Increase in court fees

An increase of court fees came into effect on 30 September 2021. Whilst the increases are generally of small value they are worth bearing in mind when submitting documents and making applications so as to avoid delays in the Court’s processing times. For example, the fee for a winding up petitions or a bankruptcy petition is moving from £280 to £302 and an on notice application from £95 to £99.

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