Finance | 01 February 2011

A recent Supreme Court judgment in Holland v Revenue and Customs (HMRC) [2010] has considered the status of de facto directors and, on a 3-2 split decision, limited the applicability of the concept. The decision is controversial because it will provide a defence in certain circumstances for persons controlling companies who are not officially directors of them against claims by liquidators and other parties interested in the winding up of those companies.
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Finance | 01 November 2010

A fashion retailer and wholesaler, part of an Italian group, had 11 retail shops and 14 concessions in department stores in the UK, through which it sold garments supplied from Italy by its parent company. The company got into financial difficulties and considered a restructuring involving the planned closure of some of its stores and the surrender of leases with several years left to run. This was clearly going to be an expensive exercise, given that the shops were in upmarket locations and let at relatively high annual rents. Eventually, it was decided to put the company into administration so that the administrators could propose a company voluntary arrangement (CVA), with the intention that four stores would be closed and the leases would be effectively surrendered by the terms of the CVA. The CVA was seen as a mechanism through which the Italian parent company would be released from its obligations under the guarantees given to the landlords of two of the stores. This ‘guarantee stripping’ had been attempted previously by the Powerhouse group, although in Prudential Assurance Company Ltd & ors v PRG Powerhouse Ltd & ors [2007] its CVA was overturned by the court on the basis that the release of the parent company from guarantees given to its subsidiaries’ landlords constituted unfair prejudice under s6 of the Insolvency Act 1986 (the 1986 Act).

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