Administrators: powers 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.
