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Withdrawal of Extra-Statutory Concession C16 (ESC 16)

The Government has introduced new legislation into the Corporation Tax Acts covering Extra-Statutory Concession C16 (ESC C16) which took effect on 1 March 2012.
Previously, with the prior consent of HMRC, distributions to shareholders as part of an informal winding-up prior to a company being struck off the Companies Register, were taxed as a capital receipt. The new Order [1] caps the limit of total distributions which can be treated as such at £25,000.
Readers will recall that the Treasury Solicitor’s office withdrew its guidelines [2] in October 2011 relating to their recovery of assets with a value of less than £4,000 following the dissolution of a company. The message is clear; the Government requires a formal process to be followed for companies which have created value but have come to the end of their life. Companies will have to be placed into liquidation when the remaining assets exceed £25,000 if the shareholders wish to have the distribution of retained profits taxed as a capital receipt.
If you require further information or wish to discuss these issues, please do not hesitate to contact us.



From InsolvencyBlog.com
Posted 1 year 8 weeks ago

Has the rescue culture lost its way?

Responding to the question raised in my last post, New law, insolvency regulation and the rescue culture, a former colleague, Paul  Brindley, believes that the rescue culture has lost its way:

 Chris
In my view the rescue culture has lost its way. There are three reasons for this:

1) The law regarding financial support directions was drafted purposely to enable creditors, not the government and not the pension fund industry generally, to meet final salary shortfalls. For the last twenty odd years every government has seen final salary schemes as an additional taxable opportunity;

2) Legislation often has unintended consequences - European employment legislation particularly so; and

3) The insolvency profession as a whole has lost its way. The governing bodies have no vision and they are seen more by outsiders as trade associations whose role is to maintain the status quo.
So yes, the rescue culture involving IPs is dead, this is recognised generally outside of the profession, just not within it.



From InsolvencyBlog.com
Posted 1 year 14 weeks ago

New law, insolvency regulation and the rescue culture

The UK insolvency regime began preparing for the 21st century with the Cork Report in 1982. That led directly to the Insolvency Act 1986, introducing the rescue mechanisms of administration and voluntary arrangements. Major refinements followed with the Enterprise Act 2002, enhancing the new mechanisms and facilitating the constructive use of insolvency procedures.
Since then, however, it has not been entirely plain sailing:

  • administration is widely seen as terminal: "going bust" is a common media description although the procedure is designed as a temporary opportunity for restoration;
  • the effectiveness of administration has been seriously blunted by various rent, pension and other claims being elevated to the status of administration expenses, payable before creditors;
  • similarly, TUPE (the implementation of the European Acquired Rights Directive) and its application by employment courts has stymied business rescue and failed to preserve employment;
  • pre-pack administrations have been occasionally abused and widely misunderstood; and
  • an erroneous perception of insolvency practitioners charging huge fees whilst failing to act in creditors' best interests has been allowed to emerge.

Many of these challenges can be attributed, at least in part, to the insolvency profession not explaining itself sufficiently well, either generally or in individual cases and either to creditors and other stakeholders or to the media and politicians.



From InsolvencyBlog.com
Posted 1 year 15 weeks ago

Pre-packs endorsed by the Government

After examining the use of pre-packs as an insolvency tool, the government has abandoned the idea of legislating to give notice to creditors in all pre-packs and concluded that:

"Pre-pack sales can offer a flexible and speedy means of business rescue and when used appropriately can be the best way of maximising returns for creditors."

The challenge that the Minister has laid down to insolvency regulators is to ensure that pre-packs are used "appropriately".
This is the right result, but insolvency practitioners should respond by using pre-packs well and, most importantly, explaining clearly and promptly why each pre-pack produces the best outcome in its particular circumstances.
The written ministerial statement issued on 26 January 2012 (extracted from Hansard) follows:



From InsolvencyBlog.com
Posted 1 year 16 weeks ago

Bankruptcy and winding-up petition reform

The government consultation Reform of the Process to Apply for Bankruptcy and Compulsory Winding Up, which proposes adjudication by Insolvency Service staff rather than a court hearing of most petitions for bankruptcy and companies winding-up, has begun to trigger debate.
The High Court's Chief Bankruptcy Registrar and the Insolvency Service's Director of Policy have recently exchanged views through Accountancy Age.
I confess to favouring the view of the learned judge. As I write, the consultation has 12 days left to run, closing on 31 January 2012. The government (through the Insolvency Service's Policy Unit) welcomes the views of all interested parties.



From InsolvencyBlog.com
Posted 1 year 17 weeks ago

Administrators' appointment valid - Minmar not followed by Norris J

The failure of directors to notify the company, in accordance with Paragraph 26, Schedule B1, Insolvency Act 1986, of their intention to appoint administrators does not necessarily render the administrators' appointment invalid.
In two carefully considered judgments in cases heard on consecutive days in November 2011, the most recent of which was handed down on 21 December:
Virtualpurple; and
Bezier:
Mr Justice Norris explains how he has been able to clarify the previously unsatisfactory state of the law.
We noted in May the surprising and unhelpful Minmar decision. Like me (but he expresses it far more eloquently in Virtualpurple), Norris J prefers the decision of HHJ McCahill QC in Hill v Stokes Plc [2010] EWHC 3726.
In Bezier, Norris J held that delivery of the notice of intention to appoint to the company's solicitors was adequate, notwithstanding the apparent requirement of the Insolvency Rules that service on the company be effected by delivering the notice to its registered office.
What a sensible way to end the year! Christmas greetings and best wishes for 2012 to all our readers.



From InsolvencyBlog.com
Posted 1 year 21 weeks ago

Edward Davey sees the merits of a single insolvency regulator

In a statement on insolvency practitioner regulation today (20.12.11) The Minister for Employment Relations, Consumers and Postal Affairs [and Insolvency] recognised strong stakeholder support for an independent single regulator. Announcing the government's response to the consultation on insolvency practitioner regulation, which closed in May 2011, he said he could see the merits of a single independent regulator.
I thought 6 months ago that a single independent regulator was an unattainable ideal and I am delighted that the idea has gained traction. Many IPs support the concept individually and R3, the trade association, is now said to be looking forward to working on it with the Minister. 
Whilst the Insolvency Service will first: 



From InsolvencyBlog.com
Posted 1 year 21 weeks ago

Zombie Companies - Has the Chancellor missed a trick?

George OsborneIn his quest for economic stimulus in the Autumn Statement, George Osborne failed to drive banks and borrowers to put the assets and resources of moribund businesses to good use.
For many months now observers have commented on the zombie companies that clog up our economy. Adam Posen of the Bank of England’s Monetary Policy Committee draws a parallel with Japan in the 1990s being stalled by unproductive borrowers on whose loans the banks could not afford to take losses. Although Posen’s observations were seeking to promote central bank monetary stimulus in continental Europe, the Bank of England has been expressing concerns about domestic bank forbearance since June 2011.
The many companies with low or no profitability or cash flow are adding nothing to the economy. Yet they tie up resources. Banks are increasingly concerned about zombie companies, but it is getting no easier for either the banks or their customers to generate positive growth. Without growth there will be no economic recovery.



From InsolvencyBlog.com
Posted 1 year 23 weeks ago

Mercer & Hole is Recruiting in Restructuring & Insolvency

Restructuring & Insolvency is an integral part of Mercer & Hole’s business. A very busy period when our core skills of constructive use of insolvency procedures, stressed corporate advisory work and solvent restructuring have been in high demand, has prompted us to grow our Restructuring & Insolvency teams.
We are now looking to employ a senior administrator, to be based in our St Albans office.  The successful candidate is likely to have at least 4-5 years of insolvency administration experience and be able to administer a portfolio of cases. The role mainly involves corporate insolvency and candidates who have gained the CPI qualification or are part ACCA qualified would be desirable.  Good organisational and communication skills are essential.
Principally reporting to a manager, but also directly to a partner, the senior administrator's duties will involve the general daily conduct and progression of administrations, members and creditors voluntary liquidations, compulsory liquidations and company voluntary arrangements, together with some assistance with advisory cases.



From InsolvencyBlog.com
Posted 1 year 26 weeks ago

European Insolvency Law Harmonisation and Theory

Preference law, rules on reorganisation or composition plans, claim validation rules and insolvency of groups of companies are included amongst the topics identified as apt for harmonisation in INSOL Europe's report to the European Parliament, Harmonisation of Insolvency Law at EU Level.
They are also the topics discussed in a paper by Roelf Jakob De Weijs in an Amsterdam Law School research paper, Harmonisation of European Insolvency Law and the Need to Tackle Two Common Problems: Common Pool & Anticommons.
Arguing for a European debate on bankruptcy theory, De Weijs explains creditors frustrating reorganisation or composition plans, creditors creating nuisance value by filing exorbitant claims and the problem of office-holders’ hold out in the case of the insolvency of a group of companies by reference to the tragedy of the anticommons (where multiple owners are each endowed with the right to exclude others from a scarce resource).
In practice, skilled practitioners are adept at circumventing or mitigating the effect of such blocking rights. Care should be taken on harmonisation to consider what affects parties' behaviour and to avoid unintended consequences. A European debate on bankruptcy theory is a good thing.



From InsolvencyBlog.com
Posted 1 year 28 weeks ago