STATEMENT ON
BEHALF OF INLAND REVENUE, HM CUSTOMS AND EXCISE AND THE REDUNDANCY PAYMENTS
SERVICE (“THE CROWN DEPARTMENTS”)
DISTRIBUTION
OF PROCEEDS OF BOOK DEBTS SUBJECT TO DEBENTURES WHERE THE CROWN DEPARTMENTS ARE
CREDITORS
This
statement is issued on behalf of the Crown Departments in light of the recent
decision of the Privy Council in the Brumark case, and relates to the
distinction between fixed and floating charges, and certain issues arising
therefrom.
Where an
insolvency practitioner causes a company to make a distribution of book debt
proceeds subject to a purported fixed charge, or proposes to do so, the Crown
Departments as creditors reserve the right to challenge such a distribution or
proposed distribution if they believe that the charge in question was actually a
floating charge.
How many
challenges of this nature are made to distributions or proposed distributions
will be a matter for the discretion of the relevant department (subject to the
state of the law) in light of the facts of the individual case.
However, as general guidance, and by way of an example, the Crown
Departments consider that where a charge has been operated so that the chargor
has been allowed an unfettered right to draw on the proceeds of the book debts
without the specific consent of the chargeholder, this does not constitute
sufficient control to qualify as a ‘fixed’ charge over such book debts.
Distributions
made or proposed to be made to chargeholders after the date of the Privy Council
decision in Brumark based on a charge such as described above and other types of
purported fixed charges which in reality are floating charges are therefore
liable to challenge from any of the Crown Departments.
In
addition, pre-insolvency VAT credits will be paid to companies subject to
insolvency procedures in preference to other Crown creditors, only in cases
where a debenture is provided and Customs & Excise are satisfied that the
charge over book debts contained therein was actually a fixed charge.
The
Crown Departments wish to make clear their view that insolvency practitioners
have a duty to follow relevant law when causing companies to make distributions.
Signed on behalf of the
Crown Departments by
|
John
Payne |
Derek
Willman |
Steve
Walker |
|
(Inland
Revenue) |
(HM
Customs and Excise) |
(Redundancy
Payments Service) |
|
