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Insolvency changes

General Information

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All @ AWEB for information and to save future queries especially from Anon the changes to creditors rights on insolvency are below

With remarkably good timing, in new insolvency processes commenced after 1st December, HMRC will be granted a massive change to their rights in insolvency, with all VAT, PAYE and NIC liabilities, being given Preferential status!

In addition to the personal liability that may already fall on directors for some HMRC debts, this will also potentially expose them to increased claims under Personal Guarantees provided to a bank.

FA simplified summary of the new order of priority is as follows:

Fixed Charge Creditors (mortgage or charge over specific assets)

HMRC Preferential debts (VAT / PAYE Etc)

Floating Charge Creditors (usually a bank)

Unsecured Creditors

The unsecured creditors have moved further down the list, but the change also reduces the value of a floating charge, most often held by a bank.

If the bank’s security is worth less, the potential for an increased liability falling upon directors under personal guarantees given to the bank also increases.

 

Have a nice day

Replies (5)

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RLI
By lionofludesch
26th Oct 2020 15:11

So back to what it was 20odd years ago, then.

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Replying to lionofludesch:
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By Cheshire
26th Oct 2020 16:04

lionofludesch wrote:

So back to what it was 20odd years ago, then.

Exactly my thoughts, Im just about an hour behind you reading Bernard's post. Thank you Bernard.

Everything is cyclical

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Replying to Cheshire:
RLI
By lionofludesch
26th Oct 2020 16:07

I never understood why they gave up their rights.

Obviously, they've started thinking the same.

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boxfile
By spilly
26th Oct 2020 20:25

Thanks for this information.
Where do unpaid employees come now though?

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Replying to spilly:
Lisa Thomas
By Insolvency Practitioner
27th Oct 2020 10:54

The employees claim from the government scheme Redundancy Payments Office ("RPO"). The RPO then stands in the shoes and claims in the Insolvency. Most of the time the employees are paid in full by the RPO. Any shortfall can then be claim in the insolvency.

Wages (capped at £800 per employee) and all holiday paid out and pension contributions for the last 12 months are preferential.

The excess wage claims, notice pay and redundancy are all unsecured claims.

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