Offer to Insolvency Practitioners (Before its too late)

The ability to recover premiums due on After the Event Insurance in insolvency claims, and the ability to recover the uplifted "success fee" under a Conditional Fee Agreement with a solicitor in insolvency claims, will no longer be available from the end of March 2016.  Accordingly, Liquidators, Administrators and Trustees in Bankruptcy should ensure they review all cases, new or old, to ensure there are no potential claims sitting on their files which they will not be able to issue from April.

If a claim is issued now, or before the end of March at the latest, then the ability to recover these legal costs will be protected (and so creditors interests maximised).  Accordingly it is vital that all Insolvency practitioners conduct a full review or audit of all of their insolvency files going back 6 years to ensure there are no potential claims that have sat on the side whilst the main asset recovery matters have been dealt with.  A failure to do this could be criticised in the future, as legal funding in the future will provide a far smaller return to the insolvent estate.

At Francis Wilks & Jones we realise that such claims may not be immediately apparent to you or your colleagues, and often the prospects of a recovery of company monies (on an insolvency appointment) are overlooked or even ignored whilst the live matters are focused on.  This can be a mistake and, to lift this burden from you we are prepared to offer, for a fixed fee of £500 plus VAT per case, a detailed review of your matter limited to 3 hours of a fee earner's time, which is a substantial reduction from our usual market rates.

For this fee we can provide advice on whether a claim exists, the legal aspects related to the proposed claim and our proposals to take the matter forward in order not to lose the ability to recover the additional legal funding (which may otherwise be payable out of the proceeds).

If you want to take up this offer please do not hesitate to contact me or any of the partners at FWJ. 

Insolvency Practitioners have a very small period of time before this opportunity goes and it does take some time to draft the necessary documentation, apply for insurance and put together the claim, so it is vital you deal with this urgently.   There are arrangements in place to deal with this anticipated demand quickly and if you would like to simply have a chat with me about this, or would liken to take up this offer, then please do not hesitate to call me at my office on 0207 841 0390.

URGENT: Changes affecting Insolvency Practitioners and Directors from today

As from today Regulations have introduced the key provisions of the Small Business, Enterprise and Employment Act 2015 (“the Act”) as regards its affect on Directors and Insolvency Practitioners.  This introduces very important changes which will have a considerable impact on Directors and the position of Insolvency Practitioners acting as Administrators or Liquidators. The key changes are addressed below.

1.  Insolvency Practitioners – a Claim is now an insolvency asset!

Sections 117 – 119 of the Act commences as from today for any post 1st October 2015 appointments as Administrator/Liquidator.  As from today, with regard to such appointments, Insolvency practitioners can now assign insolvency claims. This will undoubtedly lead to (eventually) a rush of funder interest in IP appointments where the funds or appettite to pursue litigated proceedings is not there.

Directors will also face increased difficulties in defending such claims against an insolvency application where the applicant funder now has very deep pockets.

No doubt this will also lead to Administration/Liquidation appointments in circumstances where there are no assets, as the IP will still have something to sell (subject to sufficient funding interest), and could lead to the interests of creditors being better served.

2.  Compensation Orders

They have commenced. As from today anyone disqualified under the new provisions will then be subject to the risk of a strict liability offence by way of a Compensation Order. Undertakings can be given to pay such compensation but it is undoubtedly a large majority of Disqualification Claims – treating HMRC different to other creditors – which will be the basis for such an application.

Accordingly, as from today, the signing of a Disqualification Undertaking (which may in the past have been solely to avoid legal costs of litigation) will diminish as the cost threat is outweighed by the tax (or other) liability supporting the Compensation Order/Undertaking Directors would have to pay.

3. Director Disqualification Claims – extension of limitation period

As from today, Disqualification Claims under Section 6 of the Company Directors Disqualification Act 1986 (where the company has entered into insolvency proceedings) can be brought within a limitation period of 3 years post insolvency (it was 2 years previously).  This increases greatly the ongoing and continuing risk to Directors, although please see my comments as regards commencement below.

4.  Director Disqualification – new grounds for disqualification and for findings of unfitness

As from today, a Disqualification Claim can be brought against any Director of a Company for a criminal conviction overseas in relation to their involvement in an overseas company (or similar legal entity).  This does not require that the UK company is placed in any form of insolvency proceedings or indeed does not require that the individual is currently a UK Director, although it appears to be intended to prevent a certain category of individual being appointed a Director in the UK with the associated risk to the public interest.

These changes include a change to Disqualification proceedings such that a Director who is acting as a Shadow Director (which the Act also addresses separately at Sections 89-91) of a company where unfitness is made out can now be disqualified. This reflects the corporate transparency requirements of this legislation.  In addition, when engaged in disqualification proceedings, the Court can now additionally consider additional evidence of unfitness including conduct as a director of an overseas company.

5.  Directors’ Appointments and Resignations

As from today, upon the appointment of a Director or Company Secretary (or any change to the Board) the filing requirements at Companies House now require confirmation that that individual has consented to the appointment.

This could have an affect on Non-Executive Directors or other Executive Directors where an unknown (and possibly not consenting) individual is appointed to the Board leading to the risk that they will be liable for such a breach of their statutory duties.

The Registrar of Companies is also required to write to that Director (upon his/her appoiontment) notifying them of their appointment.

 Commencement

The commencement provisions dictate that the above changes relates to conduct and proceedings occurring after today (1st October 2015) including, for Administrator/Liquidator claims, any appointments commencing from today.

For the filing requirements and notifications to Directors/Company Secretaries, the commencement date is 10th October 2015 (and accordingly applies to any notices/appointments from that date).Accordingly, the risk to Directors is not immediate and further to this the commencement provisions also require that the conduct referred to must also be post 1st October 2015.

Accordingly, we do not see this taking effect for a while, but obviously Directors should plan for such risks.As regards Insolvency Practitioners, this provides an almost immediate benefit in freeing them to dispose of good claims which they may not be capable of funding. However, for Directors, this poses an increased risk of a funder with deep pockets making claims against them. This will likely be subject to delay whilst funders put together arrangements to acquire such claims but we see this taking affect more quickly than the other 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 blogs), please do not hesitate to visit our website at FWJ contact me or my colleagues at Francis Wilks & Jones.

Bankruptcy Limits Increased

As from today the Insolvency Act 1986 (Amendment) Order 2015 (SI 2015/922 has amended Section 267(4) of the Insolvency Act 1986 such as to increase the bankruptcy level for a creditor's bankruptcy petition from £750 to £5,000.

Accordingly, for undisputed debts less than £5,000 a Statutory Demand will no longer be available to enforce an undisputed debt.  Similarly, litigated County Court proceedings will need to be used to enforce a debt, but can only leading to either Charging Order proceedings (against fixed assets, mainly property) or Warrants issued by the Court Bailiff against moveable items of value.

This streamlines the Bankruptcy process and will undoubtedly lead to a sharp decrease in bankruptcies in England and Wales and coordinates with recent legislation, which is intended to remove or mitigate the consequences of small debts and also although for the inflation has occurred since the Insolvency Act 1986 was introduced.

Whilst useful to debtors this may have severe consequences for Asset Based Lenders and small businesses, all of which may have numerous debts below the Bankruptcy limits.

If you would like to discuss any aspects of these changes (or any other changes introduced by the Act as mentioned in the previous blogs), please contact my colleagues at Francis Wilks & Jones.  Our website can be found at Francis Wilks & Jones

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.

Small Business, Enterprise and Employment Act 2015: Insolvency

Insolvency Practitioners and amendment to D Report duties – 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.

The Act has also now moved to increase the regulatory burden on Insolvency Practitioners and their report on directors’ conduct (which is usually a prerequisite before any disqualification proceedings are commenced).

In summary, and further to the previous blog, the changes as they affect IPs are as follows:

1. An immediate report on the director’s conduct must be prepared by the Official Receiver or Administrator/Liquidator (“the Office Holder”) to the Secretary of State at the date of insolvency OR at any time within a period “ending with that date”.
2. The report must be filed with the Secretary of State within 3 months or “within such longer period as the Secretary of State considers appropriate”.
3. There is an additional obligation to update this report should the Office Holder become aware of any material changes or new evidence which should have been included in the original report.
4. The initial conduct report is not required to be prepared and submitted by a second Insolvency practitioner appointment (for example where a liquidator is appointed after an administrator) unless new material comes to light which should have been included in the original conduct report.
5. This will no doubt theoretically increase the reporting duties of Insolvency Practitioners at a time when their fees are subject to criticism and closer review.

Obviously for both Insolvency Practitioners and Directors these changes will have a serious impact and should you require advice on these changes please do not hesitate to contact Francis Wilks & Jones.

Administrators: Powers To Bring Fraudulent/Wrongful Trading Claims

Currently, going back to the introduction of the Insolvency Act 1986, claims for wrongful and fraudulent trading (the latter being a far more serious allegation) could be brought against company directors by liquidators appointed over the company.

The Bill proposes to amend this provision to also allow appointed Administrators to bring such claims against directors (and also shadow directors as per the changes referred to in the previous blogs), perhaps with a view to attempting to reduce the cost of two sets of insolvency proceedings.

This is an expanded power for recovery of company losses against directors and also provides for circumstances where a company faces administration and is immediately dissolved following conclusion of the administration proceedings. Ordinarily, if any such wrongful trading or fraudulent trading claim existed, the Administrator would need to convert the insolvency to a liquidation for these purposes, a potentially expensive step with no guaranteed promise of any recovery being made.

Additionally, Section 107 of the Bill provides that any recoveries on the basis of these (and other) pre-insolvency transactions would not be payable to any holder of a fixed or floating charge (which is usually the purpose of an Administrator’s appointment) and so this may ultimately lead to a scenario where an appointed liquidator may be required to investigate such matters but is unlikely to issue proceedings in light of the requirement to convert to a liquidation if monies are recovered.

A future blog will discuss the payment of prescribed part sums to unsecured creditors out of Administration, but Section 107 recoveries do not appear to relate to such sums.

Both Insolvency Practitioners, directors and banks (or any other secured creditor) should be fully aware of these changes. At Francis Wilks & Jones we can advise on such matters.

Insolvency Practitioners And Amendment To D Report Duties

This is part of a series of blogs on the Small Business, Enterprise & Employment Bill (“the Bill”) that is proposed to come into force in April 2015.

Until the commencement of the Bill, there is a legal requirement for the Official Receiver, appointed Liquidators, Administrators and Administrative Receivers to file a report with the Secretary of State on a director’s conduct in the period leading up to the commencement of insolvency. This report is often referred to as a “D-Report”.

The Bill now proposes to make the compilation of a D Report more onerous by requiring that it be filed within 3 months (subject to any agreement by the Secretary of State to extend this period) of the commencement of insolvency, which could provide little opportunity for Insolvency Practitioners to properly report on a director’s conduct.

Additionally, the appointed Liquidator or Administrator will also have the additional duty to provide the same report on an ongoing basis where any information appears that would ordinarily have been referred to or included in the D Report. This will increase the reporting duties of Insolvency Practitioners and also serve to extend the reporting period (and thus the likelihood of disqualification proceedings being commenced against former directors).

Obviously for both Insolvency Practitioners and Directors these changes will have a serious impact and should you require advice on these changes please do not hesitate to contact Francis Wilks & Jones.