Increased powers for administrators and creditors of insolvent companies – Greater Access to Justice

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Posted in:Banking and Finance|August 4, 2015 | Join the mailing list

The Small Business, Enterprise and Employment Act 2015 (“the Act”) has amended or will amend existing legislation such as the Companies Act 2006 and insolvency legislation and will regulate a number of aspects of business including the powers of insolvency
practitioners (“IPs”).

An administrator will now have increased powers and be able to bring claims for challenging transactions at undervalue, preferences or seeking to pursue directors or shadow directors for wrongful or fraudulent trading in the same manner as a liquidator.

Also, and potentially more ground-breaking for creditors or co-directors, is that an IP shall now be able to assign these claims whilst previously they were deemed “personal” to the IP and therefore incapable of assignment.

This change should lead to creditors seeking to take assignments of these types of claims with a view to personally pursuing a culpable director in situations where the IP lacks funds, or the motivation, to do so directly.

No doubt some IPs shall still be reluctant to engage fully or to provide the assignment when requested but berg has been at the forefront of this area of the law and following the landmark victory in the case of Hockin and others v Marsden and another [2014]
in March 2014 berg has continued to successfully obtain assignments of claims from IPs for the benefit of its clients.

berg welcomes the expansion of this right of assignment particularly when coupled with the increased powers for administrators to pursue directors and third parties for antecedent transactions that have otherwise reduced the sums available to the creditors
and allowed directors to walk away with impunity.

This development is a welcome step forward and should provide greater access to justice for disappointed creditors particularly where the appointed IP, often appointed by the potential defendant director, does not have funds available or sufficient motivation
to actively pursue the claim.

If your business or your customer has been placed into insolvency, or is about to be, and you would like assistance or advice then please contact berg immediately.

Should you have any queries regarding the subject matter, or need any assistance in connection with insolvency and assignments, please contact the Dispute Resolution team on 0161 829 2599.

The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice.  No responsibility for its accuracy or correctness is assumed by berg or any of its partners or employees.  Professional legal advice should
be obtained before taking, or refraining from taking, any action as a result of this article.

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