UK Law and Practice Contributed by: Fergus Wheeler, Paul Yin, Tracy Liu and Medha Vikram, Latham & Watkins
by the court, was rendered a floating charge. However, before distributing asset realisa - tions to the holders of floating charges, the “prescribed part” (a ring-fenced fund of up to GBP800,000 for the benefit of unsecured creditors) must, subject to certain exceptions, be set aside for distribution to unsecured creditors. • Debts and liabilities: (a) provable debts of unsecured creditors and (to the extent of any unsecured shortfall) secured creditors, in each case including accrued and unpaid interest on those debts up to the date of commence - ment of the relevant insolvency proceed - ings; (b) interest on the company’s unsubordi - nated debts in respect of any period after the commencement of liquidation or after the commencement of an administration which has been converted into a distribut - ing administration; and (c) non-provable liabilities, being liabilities that do not fall within any of the catego - ries above and therefore are only recov - ered in the (unusual) event that all cat - egories above are fully paid (this does not include currency conversion claims). • Shareholders: if, after the repayment of all unsecured creditors in full, any remaining funds exist, these will be distributed to the shareholders of the insolvent company. 7.3 Length of Insolvency Process and Recoveries In general terms, the longer an insolvency pro - cess takes the greater the losses incurred by creditors. A pre-pack enforcement executed at the holding company level will typically pro - tect the wider operating group from the taint of insolvency and preserve value in its operating subsidiaries. Trading administrations will require
funding either from the business itself or from the group’s creditors while the business is market - ed. Depending on the group in question, this is usually for a limited period while the insolvency officeholder explores disposal opportunities. 7.4 Rescue or Reorganisation Procedures Other Than Insolvency See 7.9 Dissenting Lenders and Non-Consen- sual Restructurings for descriptions of schemes of arrangement and restructuring plans. 7.5 Risk Areas for Lenders See 7.6 Transactions Voidable Upon Insolvency for descriptions of antecedent transactions that may be challenged by an insolvency officeholder of the borrower/guarantor. English law does not contain a concept of lender liability for deepen - ing the insolvency of a borrower through further lending. Liability may arise if a lender acts as a shadow director of the borrower (ie, a person in line with whose directions or instructions the directors of a company are accustomed to act) but this threshold is a high one and requires a lender to act outside of its usual lending capac - ity. 7.6 Transactions Voidable Upon Insolvency Under English insolvency law, certain transac - tions can be challenged if a company enters administration or liquidation within a specific period after entering into the transaction. Transactions at an Undervalue A liquidator or administrator can apply for a court order to set aside a transaction at an undervalue. The transaction can be challenged within a peri - od of two years from its entry if at the time of the transaction or as a result of it, the company was unable to pay its debts (as defined in Sec -
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