Buying and Selling Insolvent Companies and Businesses

Foreword to second edition
Preface
Foreword to first edition
About the authors
Table of Statutes
Table of Statutory Instruments
Table of EC and International Material
Table of Cases
Downloadable precedent/Licence agreement
1 What is Corporate Insolvency?
	Introduction
	Insolvency law
		Insolvency Act 1986
		Insolvency (England and Wales) Rules 2016
		The Recast Insolvency Regulation and Brexit
		Other primary legislation
		Other secondary legislation
		Judge-made law
		Statements of Insolvency Practice
	The insolvent entity
		Partnership
		Limited Liability Partnership
		Unregistered companies
	Formal insolvency processes
		Administration
		Company voluntary arrangement
		Part A1 Moratorium
		Scheme of arrangement
		Restructuring Plan
		Receivership
		Liquidation
	Informal arrangements
		Introduction
		The process
		Common features of a workout
	Causes of company failure
		Statistics
		Common features
		Loss of market
		Failure to deal with tax affairs
		Failure of management
		General trends
		Warning signs
2 Pre-pack Administrations
	Introduction
	Benefits of pre-packs
	Criticism of pre-packs
	Case law
		Re T&D Industries plc
		Re Transbus International Ltd
		DKLL Solicitors v Her Majesty’s Revenue and Customs
		Re Kayley Vending Ltd
		Re Hellas Telecommunications (Luxembourg) II SCA
		Clydesdale Financial Services Limited and others v Smailes  and others
	The Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021
	Statement of Insolvency Practice 16
	Statement of Insolvency Practice 13
	Other matters
		The appointment process
		Employees
		The Transfer of Undertakings (Protection of Employment) Regulations 2006 (‘TUPE’)
		Landlords
		VAT
		National Security and Investment Act 2021 (‘NSAI 2021’)
		Challenging a pre-pack
		Insolvency Practitioner’s Complaints Gateway
		The Pensions Regulator and the Pension Protection Fund
		Future developments
3 Purchasing Vehicles and Insolvency Act 1986, s 216
	Introduction
	Shares or assets?
	Method of sale
	The sale process
	Hive-down
		Introduction
		Hive-down agreement
		Hive out
	Insolvency Act 1986, ss 216 and 217
		Introduction
		What is a prohibited name?
		Criminal liability
		Civil liability
		Permission of the court
		Excepted cases
	Conclusion
4 Due Diligence
	Introduction
	Essential due diligence
	Let the buyer beware
	What to investigate
		Title to the target’s shares
		Who owns the company’s shares?
		Registration of trusts and their beneficial owners
		Title to the target’s assets
		Capacity of the seller
		Consents/approvals required
		Unknown or understated liabilities
		Arrangements infringing competition law
		Connected party transactions
	Forms of due diligence
		Accountants’ report
		Legal due diligence report
		Physical inspection
		Seller’s disclosure letter and documents
	Summary
	Appendix
		Due Diligence Checklist
5 Raising Funds
	Valuation and price
	Payment terms
		Fixed cash terms
		Variable cash terms
		Deferred consideration
		Shares
		Loan notes
	Raising cash
		Bank funding
	Other funders
		Challenger banks
		Invoice financing
		Private equity/venture capital and debt funds
		Asset financing
		Stock financing
		Government-backed schemes
		Business angels
		Crowdfunding
		Peer-to-Peer (‘P2P) Lending
		Directors’ loans
		Equity finance
6 Secured Creditors
	Security interests
		Charge
		Mortgage
		Lien
		Pledge
	Other forms of ‘security’ – quasi-security
		Retention of title
		Set-off
		Invoice discounting or factoring
		Finance leasing and sale and leaseback
		Hire purchase and conditional sale
	Commercial Rent Arrears Recovery
		Introduction
		What can a landlord exercise CRAR for?
		Procedure
		What goods can CRAR be exercised over?
		What is the effect of an insolvency proceeding on CRAR?
		Recovery from a sub-tenant
		Measures introduced in response to the Covid-19 pandemic
		Creditors with the right to distrain
	Validity of security
		Terms of the security interest
		Perfection
		Priority
		Corporate benefit
		Financial assistance
	The rights of a secured creditor
		Introduction
		Enforcement of security
		Receivership
		Administration
		Financial Collateral Arrangements (No 2) Regulations 2003
		Assignment of security interests
	The position of an invoice discounter/factor
	The position of a secured creditor
		Introduction
		Classes of assets
		Assets held on trust
		Order of priority of payment
		Administrators and secured creditors
7 Goodwill, Intellectual Property Rights and Data Protection  Act Issues
	Goodwill
		Goodwill, VAT and transfer as a going concern
	Intellectual property rights
	Data protection law
		2.12 Merger, acquisition, and business re-organisation
		2.12 Merger, acquisition and re-organisation
		Data protection clause example
	Summary
	Appendix
		Insolvency Service Guidance on ‘Re-use of company names’
8 Excluded Assets
	Introduction
	Book debts
	Books and records
		The company’s books and records
		The office-holder’s books and records
	Business name
	Cash
	Claims
	Customer contracts
	Intellectual property rights
	Premises
	Third-party assets
	Retention of title assets
	Shares
	‘Catch all’ clause
9 Employees
	Introduction
	General provisions of TUPE
	Specific TUPE provisions where the seller is insolvent
		Introduction
		‘Relevant insolvency proceedings’
		Relevant insolvency proceedings – non-transfer of certain debts
		Relevant insolvency proceedings – permitted variations to contracts
		Relevant insolvency proceedings – dismissal of employees
		‘Bankruptcy proceedings or any analogous insolvency  proceedings’
		Bankruptcy/analogous insolvency proceedings – no transfer of employees or automatic unfair dismissal
	Information and consultation
		Introduction
		The information to be given
		The obligation to consult
		‘Special circumstances’ defence for failure to inform or consult
		Liability for claims
		Where the seller is insolvent
	Employee liability information
	Collective redundancies
	Overlap between TUPE and collective redundancy consultation
	TUP and payments from the NIF
		Liquidation
		Administration
		Debts covered under the statutory scheme
		Debts due as at the appropriate time
		Debts that transfer
	TUPE checklist
10 Pension Schemes
	Introduction
		Workplace pensions
	TUPE
	Pension issues on the transfer of the business
		Defined benefit schemes
		Defined contribution schemes
		Future arrangements
		Exceptions to the general rule
		Existing pension scheme
		Bulk transfer payments
	The Pensions Regulator
		Introduction
		Powers
		Financial Support Directions and Contribution Notices
		Clearance statements
		New criminal offences
		Other powers
	Pensions issues on insolvency
		Winding up the scheme
		Notice obligations
		Scheme transfer to the PPF
		Nortel and Lehman Brothers
11 How to Deal with Existing Customers and Work in Progress
	Advance protection
	Rights to vary contracts
	Other contract terms
	Other credit issues
	After a customer goes out of business
	Bona vacantia
	Purchase agreement and assignment of contracts
	Work in progress
	Practical steps to take if a customer is in difficulties
		Checklist of practical immediate steps
	The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 and Debt Pre-Action Protocol
	Acquiring the customer’s business and contracts – Insolvency Service Guidance
		‘Your role as a creditor
	Buying a business – taking over a project
	Summary
12 How to Deal with Suppliers
	Assigning and novating supplier contracts
	Tactics
	Negotiation with suppliers
13 Leasehold Premises
	Introduction
	Administration
	Part A1 Moratorium
	Receivership
	Liquidation
	Disclaimer
	Company voluntary arrangement (‘CVA’)
	Informal restructuring
	Commercial Rent Arrears Recovery (‘CRAR’)
	Forfeiture
		Introduction
		Forfeiture on insolvency
		Method of forfeiture
		Relief from forfeiture in cases of insolvency
	Assignment
		Introduction
		Assignment by the company
		Assignment by an administrator
		Assignment by a liquidator
		Assignment by a receiver
		Assignment by a mortgagee
		The assignment
	Licence to occupy
	Surrender
		Introduction
		Form of surrender
	Other options available to the tenant
	Other remedies available to the landlord
	Commercial Rent (Coronavirus) Act) 2022
Appendix
Precedents
	A. Business and asset sale agreement
	B. Assignment of intellectual property rights
	C. Novation of contract
	D. Sample retention of title clauses
	E. Debenture
	F. Guarantee and indemnity
	G. Guaranteed Liabilities
	H. Certificate confirming independent legal advice
Index