In an effort to think about something other than Brexit, the Business Support & Insolvency team at Boyes Turner have put together a snap-shot of some of the significant updates which have happened in the world of insolvency (as well as in the team) in the last quarter.
What have we been up to?
We have recently advised the directors of two companies on their potential liability under section 216 of the Insolvency Act 1986 (re-use of prohibited company names). In both instances, applications to court were necessary and we were successful in obtaining court orders granting our clients leave to act as directors of companies with trading names which would otherwise have been prohibited.
We’ve also advised the liquidators of a high end bicycle retailer in connection with a large volume of retention of title claims received from suppliers. We successfully defeated a number of those claims, allowing for the goods to be sold at auction which generated thousands of pounds for the benefit of the liquidation.
Disguised remuneration and the Loan Charge
Disguised remuneration loan schemes (such as Employee Financed Retirement Benefit Schemes and Employee Benefit Trusts) are used primarily to avoid paying Income Tax and National Insurance contributions (NICs).
To tackle this, the HMRC Loan Charge was introduced. Essentially, the Loan Charge applies where a disguised remuneration loan or credit was received by an employee on or after 6 April 1999 and remains outstanding as at 5 April 2019. If these conditions are met, then those outstanding loans are all added together and are taxed as if they were income earned in one year, unless the employee or their employer has previously accounted for tax and NICs in relation to the loan.
HMRC have clarified what they expect from Insolvency Practitioners in relation to the Loan Charge. While insolvency does not prevent the employer company having an obligation under the regime, HMRC accepts that IP’s access to information may be limited. HMRC have therefore stated that in the first instance, where an IP becomes aware that a relevant loan exists, they can fulfil their filing obligation by sending information to a dedicated HMRC e-mail address. HMRC will then choose either to make a determination of the tax due, or to pursue the tax against the individual employee.
IPs who have been appointed as trustees in bankruptcy or as IVA supervisors should be aware that where the debtor may have been mis-sold payment protection insurance (PPI) the deadline for submitting compensation claims is 29 August 2019.
If no claim is submitted by this date, claims management companies (who currently pursue PPI mis-selling claims) might instead start approaching debtors to bring negligence claims against their insolvency office-holder where the debtor had a potential PPI claim but the IP has not pursued it in time.
Insolvency regime for further education and sixth form colleges
The Technical and Further Education Act 2017 (TAFEA 2017) came into force on 31 January 2019 and sets out the framework of an insolvency regime which applies to further education and sixth form colleges in England and Wales. It introduced a special administration regime which is aimed at protecting the interests of learners at an insolvent college.
Cases that have caught our eye
Green v SCL Group Ltd and others  EWHC 954 (Ch): the High Court considered whether to appoint the joint administrators of companies in the Cambridge Analytica group as liquidators, despite objections from a party who asserted, on various grounds, that the administrators had not conducted the administration properly. Mr Justice Norris commented (amongst other considerations) that it would be pointless to require new office-holders to go over some of the same ground again as that which had already been discussed between the administrators and the aggrieved party.
In the Matter of GP Cars (Herts) Limited  EWHC 2639 (Ch): Mr Edwin Johnson QC (sitting as a Deputy Judge of the High Court) commented that the respondent to an application under section 236 of the Insolvency Act 1986 should not be required to pay the officeholder's legal costs, unless unreasonable conduct otherwise justifies such an order.
Hellard and anr as liquidators of Guardian Care Homes Limited v Graiseley Investments Limited and ors  EWHC 2664 (Ch): Insolvency & Companies Court Judge Barber excluded a witness statement of the joint liquidator where it was not probative of the allegations relied upon, but simply included opinion and commentary on documents.
Wright and others v HMV Ecommerce Ltd and another  EWHC 903 (Ch): the court decided that an electronic filing of a notice of appointment of administrators by directors outside the court’s opening hours was valid, notwithstanding that the 2018 Insolvency Practice Direction had previously said that electronic filing may not be used for appointments outside court hours.
Birdi v Price and anr  EWHC 2943 (Ch): HHJ Eyre QC clarified what constitutes tools of the trade for the purposes of section 283(2)(a) of the Insolvency Act 1986. In particular, regard should be had to the purpose of section 283(2)(a), which is to enable a debtor to achieve rehabilitation as a useful and productive member of society.