Restructuring and Insolvency Roundup: What happened in April 2021?
Administration (Restrictions on Disposal etc to Connected Persons) Regulations 2021
These regulations came into force on 30 April 2021 and impose conditions on disposals in administrations to connected persons. They provide that an administrator must not proceed with a disposal of a company’s property within the first eight weeks of the company entering administration unless creditor approval or an independent report has been obtained.
Defective or void administrator appointments
Case: Re Zoom UK Distribution v Rubra  EWHC 800 (Ch)
Summary: The directors failed to give notice of an out-of-court appointment of administrators to a qualifying floating charge as required by Schedule B1, para 26(1)(b) of the Insolvency Act 1986 (IA 1986). The Court was asked to determine whether this rendered the appointment defective or void. The Court relied on the guidance provided in Re Tokenhouse VB Ltd and held the breach rendered the administrators appointment defective only.
Government releases response to special administration consultation
On 3 December 2020, the government launched a consultation regarding proposed insolvency changes for payment institutions (PIs) and electronic money institutions (EMIs). The majority of the 15 written responses to the consultation expressed support for the introduction of a Special Administration Regime (SAR) for PIs and EMIs. The new SAR regime is expected to have as an explicit objective that special administrators return customer funds as soon as reasonably practicable whilst aiming to reduce costs wherever possible. The government plans to implement further statutory instruments containing the SAR rules over the course of 2021.
National Security & Investment Act introduced
The National Security & Investment Act received royal assent on 29 April 2021. The Act introduces a mandatory foreign direct investment (FDI) screening regime in the UK which requires notification to and approval from the government for proposed transactions for acquisitions of 25% stakes in businesses operating in specified sensitive industry sectors such as Artificial Intelligence.
Companies House publishes new form for giving notice of administrator’s proposals
Companies House has published a new form, form AM03, for an administrator to use when completing a qualifying report in connection with the Administration (Restrictions on Disposal etc to Connected Persons) Regulation 2021, SI 2021/427.
Court stays proceedings to favour Part 26A restructuring plan
Case: Riverside CREM 3 Ltd v Virgin Active Health Clubs Ltd  EWHC 746 (Ch)
Summary: This judgment was based on two applications. The first was an application by Riverside CREM 3 Ltd which sought summary judgment for arrears of rent pursuant to CPR 24.2. The second application was brought by Virgin Health Clubs Ltd for a stay of the claim under CPR 3, or alternatively for a stay of enforcement of the judgement under CPR 83.7(4) on the grounds that it is pursuing a restructuring plan under Part 26A of the Companies Act 2006. The Court refused to summarily assess the First Applicant’s application and refused to give summary judgment because it granted the Second Applicant’s application for a stay under CPR 3. It held that the interests of the wider class of Virgin’s creditors outweighed those of Riverside as a sole creditor. Furthermore, it added that the stay of the claim would avoid uncertainty in the option to pursue other remedies for enforcement beyond the scope of CPR 83.7(4).
Bankruptcy Order successfully appealed
Case: Ndyabahika v Hitachi Capital UK plc  EWHC 633 (Ch)
Summary: The appellant was successful in appealing a bankruptcy order made in the county court. The court held that the judge had failed to take into account material considerations, namely the appellant’s personal circumstances including the financial circumstances of both herself and her family. Accordingly, the judge’s discretion had not been properly exercised. As a result, the bankruptcy order was set aside and a new hearing of the bankruptcy petition was ordered.
The Insolvency Service published its monthly company and individual insolvency statistics between January and March 2021 (quarter one).
One in 396 active companies (at a rate of 25.3 per 10,000 active companies) entered liquidation between 1 April 2020 and 31 March 2021. This is a decrease from the 40.5 per 10,000 active companies that entered liquidation in the 12 months ending 31 March 2020.
During Q1 2021, there were 2,384 (seasonally adjusted) registered company insolvencies comprising:
- 2,047 creditors’ voluntary liquidations (CVLs);
- 108 compulsory liquidations;
- 192 administrations;
- 37 company voluntary arrangements (CVAs); and
- There were no receivership appointments.
After seasonal adjustment, the number of corporate insolvencies was 22% lower than in Q4 2020 and 38% lower than in Q1 2020.
One in 425 adults (a rate of 23.5 per 10,000 adults) entered insolvency between 1 April 2020 and 31 March 2021. This is a decrease from the 25.3 per 10,000 adults who became insolvent during the 12 months to 31 March 2020.
During Q1 2021, there were 29,140 (seasonally adjusted) individual insolvencies comprised of:
- 22,354 individual voluntary arrangements (IVAs);
- 4,143 Debt Relief Orders (DROs); and
- 2,643 bankruptcies.
After seasonal adjustment, the number of insolvencies was 5% lower than in Q4 2020, with numbers of IVAs, DROs and bankruptcies all lower.
Annual enforcement outcomes
The Insolvency Service has published its annual update for its enforcement outcomes. During 2020–2021, the Insolvency Service noted a total of 972 director disqualifications under the Company Directors Disqualification Act 1986 as a result of its work. This was a considerable decline on earlier years, with the number of disqualifications being between 1,200 and 1,300 for the seven years before the 2020–2021 period. The Insolvency Service further noted that 42 companies were wound up in the public interest during the same period, ten less than the previous year.