1. The extent of the administrator’s involvement with the company prior to its appointment
2. Any valuations that have been obtained
3. Any alternative courses of action which have been considered
4. What consultation, if any, there has been with major creditors
5. The price paid
6. The buyer’s name
7. Details of any connection between the buyer and company

The Statement provides that this information should be given to creditors as soon as reasonably practicable after appointment which will often be the time of first notification to creditors. Administrators are also required to keep detailed records of the reason why a pre-pack has gone ahead and, if necessary, be able to explain and justify the sale.

Bankruptcy – Orders for Sale / Exceptional Circumstances
Re Haghighat (a Bankrupt) 2009 ALL ER (D)
Chancery Division 12 January 2009
Facts:
In this case the Trustee in Bankruptcy applied to the Court for an order for possession and sale of a leasehold property occupied by the Bankrupt, his wife and their three adult children, one of whom was seriously disabled and required continuous care. The property was the Bankrupt’s only asset and, even if it was sold, there would still be a substantial shortfall in the bankruptcy. The Court had to decide whether the circumstances of the case were exceptional so that the presumption in section 336(5) of the Insolvency Act 1996 was not applied ie. that the interest of the Bankrupt’s creditors outweighed all other considerations. The Bankrupt and his wife were in the course of getting divorced and he and one of the children were planning to move out of the property. The Court was given evidence that the disabled child required constant care, although the Trustee argued that if possession was ordered, the Local Authority would be obliged to re-house the family.

Decision:
Whilst effectively the bankrupt’s estate belonged to his creditors and was the only asset, the position of the wife and the three children, in particular the one suffering from disabilities, was also material. It was not strongly disputed that the disabled child’s needs amounted to exceptional circumstances. The Court took the view that the Local Authority should make provision for the family to be re-housed and therefore made an order for possession but deferred it for three years or, if sooner, until three months after the disabled child was no longer living at the property. The Court took the view that the decision was just and equitable having regard to the competing interests and the case. 

IVA - Challenging Approval of the Proposal
Tradition (UK) Limited -v- Ahmed and Others [2008] ALL ER (D)
Chancery Division 5 December 2008
Facts:
In this case an application was made by a creditor to overturn the approval of an IVA proposal. The creditor opposed the proposal at the meeting and voted against it, however, it was approved by a majority of just under 78%. That majority would not have been achieved, however, if the votes from various family members and a family company had not been included. Those votes had been objected to by the creditor at the meeting but had been admitted to vote, albeit marked as objected to. The creditor argued that there had effectively been vote rigging and that the insolvency practitioner who acted as nominee had failed to meet the standard expected of a reasonably competent insolvency practitioner.

Decision:
The Court was satisfied that the issues raised by the creditor had raised suspicion as to whether the debts were genuine and on the balance of probabilities some of those debts had to be rejected in their entirety or reduced. The effect of this was that the 75% majority would not have been reached and the proposal would have been rejected. The creditor had therefore shown a material irregularity within the relevant rules and there was little point in holding any further meeting as the proposal still would not be approved. The Court also held that the insolvency practitioner had fallen short of the appropriate professional standard and should not have summoned the creditors’ meeting without carrying out a more detailed investigation of the family claims. He did, however, have no power to adjourn the meeting in order to do so and therefore at this stage was not ordered to pay the creditors’ costs. 

Liquidation – Prohibited Names
Glasgow City Council -v- Craig and Another 2008 SCOT (D)
11 December 2008
Facts:
This was a complicated case involving an application seeking to hold directors of the company in question liable for all of its debts and liabilities in circumstances where they had carried on parts of the company’s business using a prohibited name. In summary, they were directors of a company which was put into liquidation in January 2005. They were also directors of another company which had operated similar businesses but under different names. The claim was brought by the rating authority for Glasgow which was owed money for non-domestic rates in respect of the properties from which the various businesses had been run. The authority sought to impose personal liability for those sums on the directors in reliance on sections 216 and 217 of the Insolvency Act 1986.

Decision:
There was a clear dispute on the evidence as to which businesses were part of the different companies which had traded from different properties. The Court was of the view that the directors were not liable for all the Company’s debts and liabilities, however incurred, but only for those which had been incurred whilst the company was carrying on business under the prohibited name and as a separate business. Although the businesses in question were next door to each other, they were clearly run from separate premises and under different names. It was submitted and accepted by the Court that Parliament could not have intended the liability of directors in these situations to extend beyond the debts and liabilities of the relevant business being carried on under a prohibited name. 

Director’s Disqualification
Secretary of State for Business Enterprise and Regulatory Reform -v- Sullman and Poole 2008 EWHC 3179
Chancery Division 19 December 2008
Facts:
Disqualification proceedings were brought against a company director who had been involved in a claims handling business promoting contingency fee schemes, part of which involved the director constructing and selling an insurance product to members of the public. This activity, together with the floating of the business on the stock market and statements made to the market as a result were under investigation.

Decision:
The Court was satisfied that the director had misstated the true position with regard to the recoverability of insurance premiums to members of the public - he had established the business based upon a widespread misrepresentation of the risk that members of the public ran in purchasing the product. The Court was satisfied that it was clear that the director knew that there was a significant risk that premiums paid would not be recoverable but he failed to point this out. He also misrepresented the fact that the company’s products had caused panel solicitors to pay unlawful referral fees together with various other issues. Accordingly, there was no doubt that a disqualification order should be made so that the public were protected and to deter others. The period of disqualification was to be ascertained after further submissions. 

Bankruptcy – Enforcement of Charging Order
Tagore Investments SA -v- Official Receiver 2009 [ALL ER] (D) 63
Chancery Division 11 November 2008
Facts:
A company issued proceedings against its CEO/Managing Director alleging misappropriation of company assets. The company sought to ascertain the whereabouts of the assets, however, the Managing Director’s disclosure was untruthful in many respects. The company then obtained summary judgment against him and indicated that it intended to apply for a Charging Order over his house as soon as possible. The judgment was then assigned to the Claimant company who obtained an Interim Charging Order over the property with the hearing date for the Final Order of the 16th July 2008. The Charging Order was made absolute at that hearing, however, the Court was unaware that the previous day the Managing Director had been adjudged bankrupt on his own Petition. The company made application to the Court to disapply section 346(1) of the Insolvency Act 1986 which would have prevented it obtaining the benefit of the Charging Order.

Decision:
The Court had a discretion under s. 346(6) as to whether or not to disapply sub-section (1) and could only do so where it was fair. The Court was entitled to have regard to the reasons why enforcement of the judgment was frustrated and in this case took the view that the Managing Director was clearly capable of manipulating situations to his advantage and was likely to do so. It was accepted that he had sought to frustrate the Charging Order, disadvantage the company and benefit his own and his family’s interests. Whilst the Court should therefore only exercise its power under section 346(6) in an exceptional case, this was felt to be one as the appropriate degree of unfairness had been established. The Charging Order was therefore allowed to stand. 

Bankruptcy – Annulment
Revenue & Customs Commissioners -v- Cassells and Reed
Chancery Division 4 December 2008
Facts:
In this case HMRC served a statutory demand and ultimately obtained a Bankruptcy Order against the Bankrupt as a result of his failure to submit tax returns over a number of years. The Bankrupt had a number of assets, one of those being his share in the matrimonial home. The outstanding tax returns were then filed and the Revenue, when calculating the amount of tax owed, failed to give credit for certain deductions. This was raised by the Bankrupt a year later and he was advised that he had to make a separate application for credit regarding those deductions which he did not pursue. The Trustee in Bankruptcy then obtained an Order suspending the Bankrupt’s automatic discharge as a result of his failure to co-operate and it was discovered that in fact a separate application for credit did not have to be made and the Bankrupt was entitled to an immediate refund. This would have wiped out his liability to HRMC and the Bankrupt therefore applied to rescind or annul the Bankruptcy Order. By that stage six creditors had also submitted proofs of debt to the Trustee. The Court annulled the Bankruptcy Order and HMRC appealed on the basis that loss of opportunity alone was not sufficient to justify annulling the Bankruptcy Order, that there was no evidence that an annulment application would have succeeded if it had been made earlier and to annul the bankruptcy now would cause prejudice to legitimate creditors.

Decision:
The Court accepted that it had only limited grounds under s375 Insolvency Act 1986 to interfere with the earlier Judge’s decision but, in this case, the reason for annulling the Order could only stand if there was evidence that the Bankrupt would have applied for an annulment at the earliest possible date once he knew of HRMC’s mistake. The Bankrupt had in fact shown inaction rather than action and therefore the Court inferred that he would not have applied for an Annulment Order at the earliest possible date in any event. It was also found that such application may well have failed, partly on the basis that he would have been unable to secure all of his debts. The lost opportunity to bring an early annulment application was not in itself sufficient to justify the annulment. In addition, the existence of legitimate creditors who would be prejudiced by an annulment, in particular bearing in mind that certain of the claims may have become statute barred was a relevant issue that the Court should have taken into account. Accordingly, the annulment of the Bankruptcy Order was set aside.