Thursday 23 April 2015

Sales out of Administration to Connected Persons

Small Business, Enterprise and Employment Act 2015: COMMENCEMENT 26 MAY 2015
Section 129 of the Act provides statutory authority for the Secretary of State to introduce statutory instruments to regulate the sale of company businesses out of Administration to “connected persons”. A connected person can include both connected individuals and connected companies.
This implication of section 60A (inserted into Schedule B1 of the Insolvency Act 1986) is that any such future changes are likely to involve Administrators obtaining creditors approval to a sale of the company’s business and assets to common management, and this appears to be an attempt to both create understanding of the process with creditors and also include them in any such decision-making, which has for the past few years been subject to severe criticism in the press.
As of writing, although this provision commences on 26 May 2015 the actual implementation of any proposed change is yet to happen and so for now has no effect. However, it is quite possible that the necessary statutory instrument could be introduced by the Secretary of State very shortly after this date and accordingly Insolvency Practitioners should be prepared and sensitive to any such proposed changes.
If you would like to discuss any aspects of these changes (or any other changes introduced by the Act as mentioned in the previous posts), please do not hesitate to contact me or my colleagues at Francis Wilks & Jones.
This is part of a series of posts on the Small Business, Enterprise & Employment Bill that has now come into force on 26 March 2015 following the grant of Royal Assent and is now the Small Business, Enterprise and Employment Act 2015 (“the Act”).
This series of posts is intended to update the readers of the key changes, which should radically transform the transparency of the marketplace as regards the operation, control, ownership and risk associated to limited companies in the UK.
We have not addressed all of the issues described in our previous posts, to avoid duplication, but would welcome any queries from the reader in this respect.
The commencement of these changes is different dependant on which part of the Act is being reviewed (Section 164 of the Act defines commencement) and we have highlighted below the relevant commencement dates. Where we below stated “to be announced” this means it has not yet come into force and will commence upon the making of a Commencement Order.


The changes as set out below will be extremely important to all directors, companies and individuals with business in the future and it cannot be emphasised too strongly how important it is that you are prepared for these proposed changes. At Francis Wilks & Jones we can advise on all matters subject to these posts.

Tuesday 14 April 2015

Small Business, Enterprise and Employment Act 2015: Extension of Administration and Simplification of Insolvency Process

This is part of a series of posts on the Small Business, Enterprise & Employment Bill that has now come into force on 26 March 2015 following the grant of Royal Assent and is now the Small Business, Enterprise and Employment Act 2015 (“the Act”).
This series of posts is intended to update the readers of the key changes, which should radically transform the transparency of the marketplace as regards the operation, control, ownership and risk associated to limited companies in the UK.
We have not addressed all of the issues described in our previous posts, to avoid duplication, but would welcome any queries from the reader in this respect.
The commencement of these changes is different dependant on which part of the Act is being reviewed (Section 164 of the Act defines commencement) and we have highlighted below the relevant commencement dates. Where we below stated “to be announced” this means it has not yet come into force and will commence upon the making of a Commencement Order.
The changes as set out below will be extremely important to all directors, companies and individuals with business in the future and it cannot be emphasised too strongly how important it is that you are prepared for these proposed changes. At Francis Wilks & Jones we can advise on all matters subject to these posts.
Together with Parliament’s wish to have more transparency in the economic market place, the attempt to simplify and reduce the time spent on matters by Administrators and Liquidators has been implemented at Sections 122-126 of the Act. This includes the abolition of the requirements to hold meetings in both individual and corporate insolvency proceedings and the removal of the requirement to circulate various notices and seek creditors approval as regards specific matters (the previous blog refers).
Please note that these changes have not yet commenced, and will commence once the appropriate Commencement Order has been passed.
However, from 26 May 2015 the provisions at Sections 127 – 132 of the Act will come into force to enable an Administrator’s term of office to be extended to one year (until then the maximum extension period was 6 months), the Administrator will be able to pay unsecured creditors out of Administration (where previously it can to be converted to a liquidation before this could occur) and a creditor claim for a “small debt” does not require any formal proof to be filed (as this can often incur expensive administrative costs where numerous small creditors are proving, which may outweigh the value of determining their claim).
The changes to creditors with “small debts” will also apply to bankruptcy proceedings.
At Francis Wilks & Jones we have comprehensive experience in dealing with such matters, either seeking extensions on behalf of appointed Administrators, provide assistance to directors and advising creditors.

Saturday 11 April 2015

Small Business, Enterprise and Employment Act 2015:Liquidator’s

Sanction of Liquidator’s Actions – COMMENCEMENT DATED 26 MAY 2015
This is part of a series of posts on the Small Business, Enterprise & Employment Bill that has now come into force on 26 March 2015 following the grant of Royal Assent and is now the Small Business, Enterprise and Employment Act 2015 (“the Act”).
This series of posts is intended to update the readers of the key changes, which should radically transform the transparency of the marketplace as regards the operation, control, ownership and risk associated to limited companies in the UK.
We have not addressed all of the issues described in our previous posts, to avoid duplication, but would welcome any queries from the reader in this respect.
The commencement of these changes is different dependant on which part of the Act is being reviewed (Section 164 of the Act defines commencement) and we have highlighted below the relevant commencement dates. Where we below stated “to be announced” this means it has not yet come into force and will commence upon the making of a Commencement Order.
The changes as set out below will be extremely important to all directors, companies and individuals with business in the future and it cannot be emphasised too strongly how important it is that you are prepared for these proposed changes. At Francis Wilks & Jones we can advise on all matters subject to these posts.
Historically, where the appointed Liquidator wished to deal with creditors or issue proceedings, there were strict rules (Schedule 4 to the Insolvency Act 1986) which governed which decisions required the involvement of creditors (referred to as obtaining creditors’ “sanction” of such proposals). Similar rules apply to Trustees in Bankruptcy (as set out in Schedule 5 to the Insolvency Act 1986).
This often involved a timely and expensive (in terms of the fees of the Liquidator and his/her staff) process, the result of which there was often little or no response from creditors, who generally as disinterested in the procedure of the liquidation.
The Act has assisted the Liquidator and creditors by further limiting the areas requiring creditors’ sanction, which should in turn also reduce the Liquidator’s costs incurred in dealing with such steps.
This provision will commence very shortly and so Insolvency Practitioners are well advised to consider whether any sanction is strictly necessary for any actions after 26 May 2015. At Francis Wilks & Jones we can assist and advise on such matters.

Friday 10 April 2015

Small Business, Enterprise and Employment Act 2015: Assignment of Administrators’/Liquidators’ Causes of Action

Assignment of Administrators’/Liquidators’ Causes of Action - COMMENCEMENT TO BE CONFIRMED
This is part of a series of posts on the Small Business, Enterprise & Employment Bill that has now come into force on 26 March 2015 following the grant of Royal Assent and is now the Small Business, Enterprise and Employment Act 2015 (“the Act”).
This series of posts is intended to update the readers of the key changes, which should radically transform the transparency of the marketplace as regards the operation, control, ownership and risk associated to limited companies in the UK.
We have not addressed all of the issues described in our previous posts, to avoid duplication, but would welcome any queries from the reader in this respect.
The commencement of these changes is different dependant on which part of the Act is being reviewed (Section 164 of the Act defines commencement) and we have highlighted below the relevant commencement dates. Where we below stated “to be announced” this means it has not yet come into force and will commence upon the making of a Commencement Order.
The changes as set out below will be extremely important to all directors, companies and individuals with business in the future and it cannot be emphasised too strongly how important it is that you are prepared for these proposed changes. At Francis Wilks & Jones we can advise on all matters subject to these posts.
SectionS 120-121 of the Act PRO was included in the original bill perhaps to prepare for this, but has nevertheless remained, and provides the power for appointed Liquidators or Administrators to assign certain causes of action that arise only in insolvency proceedings (and therefore were previously unassignable, unlike other types of claim).
As stated in the previous post, the proceeds of such assigned causes of action would not be caught by any secured debt held by a debenture holder. This is very good for creditors, who could benefit from the increased presence of litigation funders in the legal market (as is occurring in various other sectors).
If you are an insolvency professional, or a defendant facing such proceedings, then aFrancis Wilks & Jones we can certainly help. We can introduce the appropriate litigation funders or alternatively assist you with the technical and strategical aspects of your case.

Thursday 9 April 2015

Small Business, Enterprise and Employment Act 2015 Administrators: Powers to bring fraudulent/wrongful trading claims

Administratorspowers to bring fraudulent/wrongful trading claims– COMMENCEMENT ORDER TO BE ANNOUNCED

This is part of a series of posts on the Small Business, Enterprise & Employment Bill that has now come into force on 26 March 2015 following the grant of Royal Assent and is now the Small Business, Enterprise and Employment Act 2015 (“the Act”).
This series of posts is intended to update the readers of the key changes, which should radically transform the transparency of the marketplace as regards the operation, control, ownership and risk associated to limited companies in the UK.
We have not addressed all of the issues described in our previous posts, to avoid duplication, but would welcome any queries from the reader in this respect.
The commencement of these changes is different dependant on which part of the Act is being reviewed (Section 164 of the Act defines commencement) and we have highlighted below the relevant commencement dates. Where we below stated “to be announced” this means it has not yet come into force and will commence upon the making of a Commencement Order.
The changes as set out below will be extremely important to all directors, companies and individuals with business in the future and it cannot be emphasised too strongly how important it is that you are prepared for these proposed changes. At Francis Wilks & Jones we can advise on all matters subject to these posts.
When it commences, section 117 of the Act will permit appointed Administrators to bring wrongful/fraudulent trading claims against directors (and also shadow directors as per the changes referred to in my previous blogs). This brings it into line with other types of claim, which may only be made against directors in insolvency proceedings.
Additionally, as with most insolvency claims, sums recovered as a result of fraudulent/wrongful trading claims will not be payable to a secured creditor with a floating charge over the company’s assets (as pre-insolvency this claim was not part of the company’s assets).
Curiously though, we envisage this will create unusual circumstances where an Administrator, who is usually appointed by the floating charge holder (or at least at their behest by directors) may not be able to benefit from this power but will have to seek a share of the proceeds (net of the Administrator’s fees and those of a subsequently appointed liquidator) together with other unsecured creditors.
Both Insolvency Practitioners, directors and banks (and any other secured creditor) should be fully aware of these changes. At Francis Wilks & Jones we can advise on such matters.

Wednesday 8 April 2015

Small Business, Enterprise and Employment Act 2015 Compensation Orders

Compensation Orders following disqualification – COMMENCEMENT ORDER TO BE ANNOUNCED
This is part of a series of posts on the Small Business, Enterprise & Employment Billthat has now come into force on 26 March 2015 following the grant of Royal Assent and is now the Small Business, Enterprise and Employment Act 2015 (“the Act”).
This series of posts is intended to update the readers of the key changes, which should radically transform the transparency of the marketplace as regards the operation, control, ownership and risk associated to limited companies in the UK.
We have not addressed all of the issues described in our previous posts, to avoid duplication, but would welcome any queries from the reader in this respect.
The commencement of these changes is different dependant on which part of the Act is being reviewed (Section 164 of the Act defines commencement) and we have highlighted below the relevant commencement dates. Where we below stated “to be announced” this means it has not yet come into force and will commence upon the making of a Commencement Order.
The changes as set out below will be extremely important to all directors, companies and individuals with business in the future and it cannot be emphasised too strongly how important it is that you are prepared for these proposed changes. At Francis Wilks & Jones we can advise on all matters subject to these posts.
At Section 110 of the Act is a further consequence for directors of insolvent companies. This inserts Section 15A into the Company Directors Disqualification Act 1986 andprovides that, upon the application of the Secretary of State, the Court to make a Compensation Order against a disqualified director provided such misconduct, “has caused loss to one or more creditors of an insolvent company”.
The prime situation where this is likely to occur is where HMRC have not been paid or has been paid less. The amount payable under the compensation order is referable to the directors’ conduct and the quantum of the loss which, without any further restriction, could make this an extremely severe penalty for directors who are liable by reference to their failure to control the wrongdoing director (for example non-executive and spouse directors who may otherwise have had limited involvement in the company).
The limitation period for an application for a Compensation Order is 2 years from the date the disqualification order was made or the date when a disqualification undertaking is accepted.
This will have the dual affect of disincentivizing people to offer a disqualification undertaking (unless these can be linked to an agreed order for compensation) and will lead to the disqualification consequences potentially surviving insolvency by up to 5 years.
Faced with disqualification proceedings, as a result of these changes it is now even more important to seek legal advice. At Francis Wilks & Jones we can advise on all of these risks.

Tuesday 7 April 2015

Small Business, Enterprise and Employment Act 2015: Director Disqualification

Director disqualification – extension of limitation period – COMMENCEMENT ORDER TO BE ANNOUNCED
This is part of a series of posts on the Small Business, Enterprise & Employment Bill that has now come into force on 26 March 2015 following the grant of Royal Assent and is now the Small Business, Enterprise and Employment Act 2015 (“the Act”).
This series of posts is intended to update the readers of the key changes, which should radically transform the transparency of the marketplace as regards the operation, control, ownership and risk associated to limited companies in the UK.
We have not addressed all of the issues described in our previous posts, to avoid duplication, but would welcome any queries from the reader in this respect.
The commencement of these changes is different dependant on which part of the Act is being reviewed (Section 164 of the Act defines commencement) and we have highlighted below the relevant commencement dates. Where we below stated “to be announced” this means it has not yet come into force and will commence upon the making of a Commencement Order.
The changes as set out below will be extremely important to all directors, companies and individuals with business in the future and it cannot be emphasised too strongly how important it is that you are prepared for these proposed changes. At Francis Wilks & Jones we can advise on all matters subject to these posts.
Director disqualification claims previously could only be brought against directors within a period of 2 years from the date of insolvency
However, this limitation period is now extended to three years and, as a result of the shortening of the report timetable for liquidators/administrators to provide their reports on the directors’ conduct, there is a much greater period of time during which investigations into conduct of directors of insolvent companies can continue.
As stated above, this widening of the liability of directors includes shadow directors, and will certainly have consequences for non-executive directors who historically considered they were exempt from such risk.
The extension of this investigation period will obviously mean that the Secretary of State will be able to put together a stronger case in future disqualification claims, which are issued to protect the public interest. Conversely, this will leave the potential consequences of having been a director of an insolvent company will go on even longer with the ongoing threat of a disqualification claim hanging above directors (plus compensation orders which will further extend this threat – see the next blog).
It is always recommended that former directors confront any initial enquiries they received early on rather than ignoring them and these changes, once implemented, will make this even more important. Please contact Francis Wilks & Jones should you require any further assistance with regard to these matters.