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InsolvencyMonday 5 December 2022

Substantial disposals by administrators in the first 8 weeks: when is the purchaser a connected person?

David Pollard has been looking at the statutory provisions dealing with substantial disposals by a company in administration in the first 8 weeks of the administration.  When is a potential purchaser a connected person under the new provisions that come into force at the end of April 2021?  The new legislation was the Administration (restrictions on Disposals etc to Connected Persons Regulations 2021 and para 60A in Schedule B1 to the Insolvency Act 1986.

The relevant tests for connection are complex.  They use concepts from other areas of the insolvency legislation, but set out a new and different set of tests.  David covers this in detail in his paper and also includes a “deceptively short” checklist.

He suggests that the insolvent company (acting through its administrators) and a potential purchaser should each seek to identify all their, and their directors and officers, associates  to check if anyone appears on both lists.  But he points out that this may not be a simple matter.  It may well catch a very wide number of companies and individuals (eg a former husband of an aunt of the husband of a director of the company is an associate of that director).

One of the problems is that it is not clear whether a person associated just as a director is a “non-employee associate” or not.  David gives his view (a director is treated the same as an employee and so is not a non-employee associate”), but until there is clarificatory caselaw parties will want to assess the relevant risks!

A copy of his full paper (28 pages) can be downloaded from the link here

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