It seems this practice is no longer acceptable – no matter how urgent the case.

Possibly this will result in more out of hours filings on a “hostile” basis.

The EAT heard five appeals that all looked at the same point: does administration under Schedule B1 constitute “insolvency proceedings instituted with a view to the liquidation of the assets of the transferor” within the meaning of regulation 8(7) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)?

The EAT held that, contrary to its 2009 decision in Oakland v Wellswood (Yorkshire) Ltd, administrations cannot be “bankruptcy … or … analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor” within the meaning of regulation 8(7) of TUPE.

Consequently, all employees who are employed by the transferor immediately before the transfer takes place will have their contracts transferred under TUPE. Where a sale of an undertaking by an administrator amounts to a “relevant transfer” for the purposes of TUPE, the employees assigned to that undertaking will transfer to the buyer and be protected against transfer-related dismissal. This is so whether or not the sale is pursuant to a “pre-pack” arrangement.

The five cases were listed together so that there could be an authoritative decision as to whether regulation 8(7) of TUPE could apply to administration. However - somewhat ironically - the fact that this ruling conflicts with the Oakland decision means that an actual definitive decision may need to be made by the Court of Appeal sometime in the future. In the meantime, employment tribunals will probably follow this ruling rather than Oakland.

Corporate insolvencies across the board were down on the same period last year: compulsory liquidations and creditors’ voluntary liquidations decreased by 11.3% (seasonally adjusted), corporate receiverships by 23.9%, administrations by 24.4% and company voluntary arrangements by 22.4%.

Personal insolvencies followed the same trend, save for debt relief orders. Bankruptcies decreased by 29.2% and individual voluntary arrangements by 5.4%. Debt relief orders increased by 15.4%.

Further analysis of these statistics by the Corporate Recovery and Insolvency Team follows shortly.

Well, essentially, the BIS report says the following:

1. Broadly speaking, the report identifies that there has been a better than expected awareness of the key changes in the Act and a higher than anticipated take up of certain measures. 85% of those companies interviewed were aware of the changes under the Act.

2. Whilst there was an acknowledgement that there were costs savings and benefits from simplifying procedures for private companies on resolutions and meetings, over a third of companies interviewed disagreed that company law had been simplified. This is a rather telling statistic in itself given that simplification was one of the main objectives of the Act when the White Paper was issued a number of years back.

3. The report highlights that there is already a need to improve certain areas of the Act – in particular those provisions dealing with directors’ duties and the duty to promote the success of the company, business review and enfranchising indirect investors.

So what can directors glean from this report? Not a great deal really, and it can be argued that at a time of continuing economic uncertainty, the Government should be spending more time and resources on guiding and assisting directors through the maze of this complex piece of legislation, with a view to helping them run their companies more efficiently. No doubt directors will be thinking they would like a helping hand from the Government on the key provisions in the Act rather than have to face the prospect of having to implement further changes in the future. Is this really simplification? Probably not, but we live in an age of over reporting and no doubt there will be more reports to follow. Whatever happens, directors can be certain of one thing – Whitehall will be introducing changes to the Act – you have have been forewarned !

HMRC v Airtours Holiday Transport Ltd [2010] UKUT 404 (TCC)

A large holiday company (My Travel Group) suffered financial difficulties, and arranged for PwC to liaise on its behalf with its banks, bondholders and other creditors.  The company reclaimed input VAT in respect of these services.

HMRC issued assessments to recover the tax, on the basis that the supplies had actually been made to the company’s creditors, rather than to the company itself.   Their contention was that since the company had not recevied the supplies (even though they had paid for them) the company would not not be able to recover VAT.  Since the creditors had not paid for the supplies they also could not recover the VAT.

The First-Tier Tribunal allowed the company’s appeal but the Upper Tribunal reversed this decision and found in favour of HMRC.

Comment

This case seems to be a victory for the taxman but a loss for professional advisers and struggling businesses.  Since VAT will be paid but not recovered this will make professional fees that much more expensive.

In light of this decision, professional advisers should assess their letters of engagement and billing arrangements to determine who, in truth their client is.

If you would like to discuss this with anyone please contact me or Carolyn Jones (in our Banking and Finance team) on 01923 202020.

If you miss the deadline it could be costly, as paper returns filed after this date could mean a £100 penalty.

An alternative to paper-filing is to file your return online, which benefits from a January deadline.

If you would like assistance in preparing and filing your tax returns, please contact James Odds on 01923 202020 or james.odds@mablaw.com.

In the report, the OFT said that landlords, as unsecured creditors, are unfairly disadvantaged in insolvencies compared to secured creditors (such as banks) and should be given greater powers to influence the fees charged by insolvency practitioners.

The OFT has offered to assist the Department for Business, Innovation and Skills (BIS), and the Insolvency Service in taking forward its recommendations. The British Property Federation (BPF) has expressed its support for the recommendations and has urged BIS to act on them.

• How consumers enter into credit commitments, including the way in which credit is sold and the extent to which consumers understand what they are committing to;
• What issues arise during the lifetime of a loan from both the consumer and the lender perspectives; and
• What happens if things go wrong: are the current insolvency solutions fit for purpose?

A consultation on specific proposals is anticipated later this year or early 2011.

A total of 35,682 people became insolvent between January and March 2010 – the fifth consecutive quarter that the number of insolvencies has hit a record level.

The main statistics are as follows:

• Individual bankruptcies rose by 7 per cent over the quarter, but fell by 10.7 per cent on the same quarter in 2009;
• Individual voluntary arrangements (IVAs) rose by 20.1 per cent on the same quarter in 2009;
• Debt relief orders (introduced in April 2009) rose by 6 per cent over the quarter;
• Compulsory corporate liquidations fell by 1.3 per cent over the quarter and by 14.8 per cent on the same quarter in 2009;
• Voluntary corporate liquidations fell by 11.4 per cent over the quarter and by 19.1 per cent on the same quarter in 2009.

Solvency II, which is the new solvency regime for all EU insurers and reinsurers, will now come into force on 31 December 2012 (instead of 31 October 2012) so that it coincides with the financial year-end of most European insurance companies.

Solvency II aims to introduce solvency requirements that better reflect the risks that companies face, and deliver a common supervisory system across all EU member states.

The court decided to give permission for the trial to proceed.  The court took the view that the defendant and his insolvency practitioner’s conduct had been at best cynical, and at worst, wholly unacceptable.  In particular there was the last minute raising (for the first time) of the defendant’s potential insolvency; the lack of any information about the defendant’s financial position; the failure to provide documents; and the difficulties of ensuring any potential contact with the defendant. 

Although the trial was in the Technology and Construction Court, the Judge held that he had jurisdiction to consider the claimant’s application for leave under section 252.  The merits of the application were overwhelming and accordingly the claimant could continue with the trial.

This case demonstrates that even where an application for an IVA is made at the 11^th hour, it may still be possible to continue with proceedings in court in an appropriate situation. 

(1) Miss Hall and (2) Mr Shivers v Mr Jan Van Der Heiden [2010] EWHC 537

However, we have been advised today that Registrar Derrett will now be dealing with all extension applications filed in the High Court until rotation in September 2010, and that she intends to list each extension application for hearing. So applications will not, for the foreseeable future, be dealt with on paper. The effect of this is that the cost of making an application will increase, as representation will be required at the hearing. In addition, applications will need to be made in good time so that they can be heard well before the expiry of the period of administration.

The Court held that rent would continue to be payable as an administration expense quarterly in advance under the terms of the two leases whilst the administrators retained or used any part of the premises for the benefit of the administration.  Applying the principles imposed in liquidations, the Court held that an administrator electing to hold leasehold premises could do so only on the terms and conditions of the lease, and any liability incurred while the lease was being enjoyed or retained for the benefit of the administration was payable in full as an expense.

The High Court had ruled that although each of the two provisions were not a problem, the combined effect of the termination of the licence and transfer of shares at market value once the licence had been terminated would be to deprive W’s creditors of the value of the licence. Accordingly, this would breach the ‘anti-deprivation rule’ and not be permitted under insolvency laws.

The Court of Appeal has now reversed that decision. The purpose of the rule was to invalidate contractual provisions which expressly or had the effect of disapplying a provision of the Insolvency Act 1986 – it did not have any wider application. The High Court had been wrong to look behind the wording of the contract and assess the overall commercial effect of the joint venture agreement and licence in combination. There was nothing in either the joint venture agreement or the licence which offended against the 1986 Act. The Act did not stop one party from providing that contracts or licences were terminable upon the other’s insolvency event. Similarly, the Act did not prevent someone from purchasing (for value) the other’s assets if that other became insolvent.

• Allow an insolvency office-holder to pay costs and expenses incurred before his appointment as an expense. This would, for example, allow an administrator to recover the costs incurred in negotiating a pre-pack sale of the assets of an insolvent company;
• Allow for the remuneration of insolvency practitioners on a fixed fee basis;
• Allow for electronic communication between insolvency office-holders and the creditors of an insolvent company or individual;
• Dispense with the need for a court to endorse a notice of disclaimer before it is valid; and
• Bring insolvency court proceedings more into line with the Civil Procedure Rules.

The Rules are set to come into force on 6 April 2010. A revised and consolidated set of Rules, which will replace the Insolvency Rules 1986, is expected to come into force in April 2011.