Personal Bankruptcy And Company Insolvency

Karen Leigh

Description

This Revised Edition of a Guide to Personal Bankruptcy, and Company Insolvency is a concise guide to the steps underpinning the processes Of bankruptcy and insolvency and the impact on individuals and companies. In the last few years, the whole process of bankruptcy has moved from the original position where a person was bankrupt for a number of years to a position where the whole process has been streamlined, with the period of bankruptcy shortened to one year. In addition, debt relief orders are being introduced which give greater relief to the would-be bankrupt. Company insolvency has also been streamlined to make the process easier for all concerned.

Sujets

• Law

Informations

• Publié par: Straightforward Publishing
• Date de parution: 25 septembre 2020
• Nombre de lectures: 0
• EAN13: 9781913776312
• Langue: English

Extrait

A GUIDE TO PERSONAL BANKRUPTCY AND COMPANY INSOLVENCY
THE EASYWAY
Karen Leigh
Editor: Roger Sproston






Easyway Guides
Easyway Guides
Straightforward Co Ltd 2020
All rights reserved. No part of this publication may be reproduced in a retrieval system or transmitted by any means, electronic or mechanical, photocopying or otherwise, without the prior permission of the copyright holders.
ISBN: 978-1-913342-75-3 ePUB ISBN: 978-1-913776-31-2 Kindle ISBN: 978-1-913776-21-3
Printed by 4edge www.4edge.co.uk
Cover design by BW Studio Derby
Whilst every effort has been made to ensure that the information contained within this book is correct at the time of going to press, the author and publisher can take no responsibility for the errors or omissions contained within.
Contents
Introduction
The Corporate Insolvency and Governance Act 2020-overview

PERSONAL BANKRUPTCY
Chapter 1 . The Personnel Involved in Bankruptcy
Chapter 2 . Debt Management Plans
Chapter 3 . Individual Voluntary Arrangements
Chapter 4 . Administration Orders
Chapter 5 . Debt Relief Orders
Chapter 6 . The Process of Bankruptcy-England and Wales
Chapter 7 . Bankruptcy and Alternatives to Bankruptcy in Scotland
Chapter 8 . bankruptcy in Northern Ireland

COMPANY INSOLVENCY
Chapter 9 . Compulsory Liquidation
Chapter 10 . Voluntary liquidation
Chapter 11 . All Liquidations-General
Chapter 12 . Receiverships
Chapter 13 . Company Voluntary Arrangements
Chapter 14 . The Administration Process
Chapter 15 . Insolvent Partnerships
Chapter 16 . Deceased Insolvents
Glossary
Useful addresses
Index
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Introduction
Over the last ten years, personal bankruptcies and company insolvencies in the UK have risen to record levels, in large part to do with the economic climate, also the steady rise in personal debt. At the time of writing, we have been through the worst four months on record due to COVID 19. In August 2020 there has been a significant rise in both personal debt and company bankruptcies and insolvencies. The worst is yet to come. Also, It is not clear how BREXIT will affect the future, if at all.
What is clear is that all of this has to be managed. In order to facilitate and manage the ongoing of company insolvencies and bankruptcies, the government has brought in the Corporate Insolvency and Governance Act 2020, commencing 25th June 2020.
The Corporate Insolvency and Governance Act 2020
The Corporate Insolvency and Governance Act 2020 (the Act) promises to bring into effect a mixture of temporary measures to alleviate the problems created by the Covid-19 pandemic and some permanent reforms to the UK restructuring and insolvency regime.
Temporary Covid-19 measures
The Act introduces temporary changes to two important aspects of the insolvency regime; wrongful trading and statutory demands.
Wrongful trading
In the UK a director can be held financially liable for wrongful trading if he knew, or ought reasonably to have known, that there was no reasonable prospect of the company avoiding insolvency and did not take every step to minimise the potential losses to the company s creditors.
Although it was announced by the Government that the wrongful trading provisions would be temporarily suspended, in fact the Act instead removes liability from the directors for any worsening of the financial position of the company or its creditors that occurs between 1 March and 30 September 2020. Thus a court can still find that wrongful trading has occurred but will not ask the directors to contribute to the company s assets as a consequence. This temporary change means that although directors should still take every step to minimise losses to creditors, they are unlikely to be found personally liable if they are subsequently found to have wrongfully traded.
As explained above, these provisions do not really amount to a full suspension of the wrongful trading regime but instead effect an adaptation, making liability very unlikely during the relaxation period. Notwithstanding this temporary suspension, directors need to be aware that they remain subject to fiduciary duties under the Companies Act 2006 and may still incur other forms of statutory liability such as liability for fraudulent trading. In addition, directors can still be found liable under the compensation order regime whereby the Insolvency Service can apply to court for a compensation order where a director has been disqualified and their behaviour has caused a quantifiable loss to creditors of an insolvent company. Compensation orders may become more prevalent to prevent (or punish) behaviour that abuses the relaxation of wrongful trading.
Statutory demands and winding up petitions
The Act places temporary restrictions on the circumstances in which a creditor can bring a petition to wind up a company. Creditors were not able to bring winding up petitions based on statutory demands served between 1 March and 30 June 2020. This gave companies temporary respite from aggressive debt collection methods where the company s difficulties are short-term and caused by the Covid-19 pandemic.
Permanent reforms to UK insolvency law
The package of permanent reforms include a standalone moratorium, a new restructuring plan with provision for cross-class cram-down and the prohibition of contractual rights to terminate on the grounds of insolvency.
Moratorium
The new moratorium will be a standalone procedure designed to give struggling businesses breathing space to come up with a rescue plan. While the moratorium is in force, the company is protected from creditor enforcement action and is provided with a payment holiday in respect of certain liabilities that were incurred before the moratorium came into existence.
Directors of insolvent companies, or companies that are likely to become insolvent, can obtain a 20 business day moratorium which will allow viable businesses time to restructure or seek new investment, free from creditor action. The moratorium, which can be extended in certain circumstances, will be overseen by an insolvency practitioner acting as a monitor although the directors will remain in charge of running the business on a day-to-day basis subject to certain constraints. The intention is to provide a streamlined procedure that keeps administrative burdens to a minimum, makes the process as quick as possible and does not add disproportionate costs on to struggling businesses.
During the moratorium the company must continue to pay on-going costs of running the business in addition to certain premoratorium debts which do not benefit from a payment holiday during the moratorium including, notably, financial creditors such as banks and other lenders. Although there is no payment holiday in respect of liabilities owed to these financial creditors, the enforcement of security in their favour is not permitted. Whilst liabilities to financial creditors can be accelerated, the complicated rules relating to debt priorities mean that accelerated debt will not enjoy super-priority alongside other specified moratorium debts in any subsequent insolvency. Therefore, funders in particular, need to understand the implications of the new moratorium and how they may influence it, as the Government intends it to become a popular alternative to those restructuring tools already in use.
Restructuring plan
The new restructuring plan procedure is based on the existing scheme of arrangement with important distinctions. Unlike a scheme of arrangement, there is no requirement for a simple majority in number of creditors to approve the arrangement, votes on the restructuring plan will be calculated solely by the relevant debt or shares so 75% in value of the creditors or members of a class have to vote in favour for the restructuring plan to be implemented. The restructuring plan will, if approved by the court, enable companies to bind all creditors (including potentially both secured and other dissenting creditors) by cramming down their debts.
It is hoped that the restructuring plan will provide a flexible means of implementing a balance sheet restructuring whilst still needing court sanction to become effective. The cross-class cram down , which is a new concept compared to schemes of arrangement, allows a degree of greater flexibility whilst the restructuring plan may also give more manoeuvrability to a creditor of a class who can pass the 75% value test, without needing to also pass the majority in number test of a scheme of arrangement.
Contractual termination provisions
It is standard practice in the UK to include provisions in supply contracts whereby one party can terminate the contract if the other goes into some form of insolvency procedure. These clauses will now cease to have effect (except for a narrow set of exceptions).
Personal debt in 2020
More people are opting for alternatives to bankruptcy and are going for IVA s (Individual Voluntary Arrangements. People are also opting for Debt Relief Orders, which are cheap to enter into but apply only to those with less than 15,000 in unsecured credit debts and under 1000 in assets. In addition, pensioners, once a negligible part of the whole picture, are increasingly having to seek relief from debt.
As with Company bankruptcy and COVID 19 there has been a huge increase in personal debt, as a result of company failures and job losses and it is to be expected that there has been an enormous backlog of work for the practitioners. During the period when it was impossible to interact with the various agencies involved the government brought into a series of payment holidays, such as mortgages and credit cards. However, as these tail off so will the number of people in need of help increase.
This wide-ranging book, which covers personal bankruptcy and alternatives to bankruptcy, along with company liquidations and general insolvency, deals firstly with the personnel involved in bank