Happy New Year!
Or not, as the case generally tends to be in the world of Insolvency and Restructuring….
It seemed a sensible idea to peer into the future for 2012 from an Insolvency perspective, and try to offer some words of wisdom, or at least comfort. So what do I predict from my attic room for the coming year?
1. More bankruptcies and winding-up petitions – the Banks and HMRC have been taking more assertive action over the past couple of months. Time to pay requests are being rejected more often than not, sometimes in the teeth of commercial sense. It won’t just be football clubs facing high-profile winding-up petitions – the construction industry and retail sectors are struggling, and I suspect the next sector to be hit hard by the economic climate will be the DIY sector. Those who are stuck in their house due to negative equity have already updated their houses, and few people are moving to new homes.
2. Saving businesses – pre-packs are under threat again with the proposal that insolvency practitioners have to give 3 working days’ notice to creditors of administration. However, I suspect that will be less of a problem thanks to the insertion of a clause in the proposed legislation that insolvency practitioners don’t have to do that if it puts saving the business at risk (so, that would be every time then). TUPE issues will reduce for the time being thanks to the Court of Appeal confirming administration is not the same as liquidating the assets. However, I have seen several businesses destroyed by fears on the part of insolvency practitioners of litigation or criticism, resulting in a failure to sell on the businesses and their closure.
3. Rights of employees – the Redundancy Payments Service is taking a harder view on the calculation of monies due to employees, who is and is not an employee, and other issues. The proposals for fees to bring claims in the Employment Tribunal I cannot comment on, but I do not think it takes much imagination to see some employees unable or unwilling to bring claims following the closure of their employer for insolvency reasons, and suffering financial hardship as a result.
4. Reduction of litigation – with house prices at rock bottom and most people’s financial value tied up in their homes, there is little point suing someone whose only asset is in negative equity. Already, I have had to advise not pursuing a legally good claim because the target of the litigation was not worth financially pursuing. The change to court fees with the introduction of hearing fees is also deterring litigation.
5. Reduction of “no win no fee” cases – if the Jackson reforms complete, the substantial insurance premiums to protect claimants if they lose the claim from the other side’s legal costs cannot be recovered from the other side if the Claimant wins. In insolvency, such premiums start at £10,000. Why would a claimant pursue someone (and they of course must have a good case at the start to get a CFA agreement) for say £20,000 if they are going to have to pay out £10,000 immediately if they win? Why should insolvency practitioners take the risk and invest time and money in pursuing dodgy directions on behalf of creditors if the premium has to be paid out of the compensation? Very few will. Creditors will be the first to suffer and dodgy directors will escape justice.
Obviously, if the above turns out to be completely wrong, I was just guessing. Don’t rely on this as legal advice. It seems to me, in conclusion, that businesses struggling at the moment are more likely to go under, the business will be hard to save via a pre-pack or post -liquidation sale, employees are more likely to end up out of the work with less money from the Redundancy Payments Service (and there will be less opportunity to go to an Employment Tribunal), and dodgy directors will be able to trade again with little punishment.
The only comfort I can offer is that there will be less work and litigation for lawyers. No, I’m not really comforted by that either.
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