Lawyer Monthly - December 2021 Edition

hamper the insolvency procedure and a solution can be better employed through the legal route, the arbitration agreement may be concluded. The claimant must then pursue their claim through the insolvency process and submit a proof of debt to the licensed insolvency practitioner. If the debt amount is in dispute, this can be challenged through the insolvency process. During an insolvency procedure, all monetary claims are centralised and dealt with in an orderly and transparent manner. Heightened risk of COVID-19 insolvency As the moratorium on winding up petitions has now been lifted, businesses on the brink of collapse may be in the firing line of a winding up petition from creditors or voluntarily enter a formal insolvency procedure. Steps must be taken to analyse the insolvency risk of financially distressed parties to assess if it is commercially possible for the party to commit to a favourable award, and if they can cover their share of the costs incurred to facilitate arbitration proceedings. This information is publicly available on Companies House, the Gazette and business intelligence platforms, such as Red Flag Alert. It is paramount to understand the risks of entering arbitration proceedings with a financially distressed party and the governing law. 72 WWW.LAWYER-MONTHLY.COM | DEC 2021 MEDIATION AND ARBITRATION - HOW CAN INSOLVENCY IMPACT ONGOING ARBITRATION PROCEEDINGS? automatically applied when a business enters a compulsory insolvency procedure and appoints a licensed insolvency practitioner. The Insolvency Act 1986 states that, during a moratorium, no legal process (including legal proceedings, execution, distress or diligence) may be instituted, carried out or continued against the company or its property except: (i) employment tribunal proceedings or any legal process arising out of such proceedings, (ii) proceedings, not within sub-paragraph (i), involving a claim between an employer and a worker, or (iii) a legal process instituted, carried out or continued with the permission of the court This typically applies to arbitration proceedings, for which express permission must be granted by the court or a licensed insolvency practitioner for proceedings to continue. This is to ensure that a solution can be reached through this route without disruption to the insolvency procedure and a potential breach of creditor rights. If an application submitted by a creditor can demonstrate that the administration or liquidation process will not be obstructed by continuing arbitration proceedings, permission may be obtained. In this event, the insolvent party will likely be replaced by the insolvency practitioner. Alternative to arbitration proceedings If arbitration proceedings are likely to Keith Tully Partner, Real Business Rescue 340 Deansgate, Manchester, Greater Manchester, M3 4LY Tel: +44 0161 210 5109 E: manchester@realbusinessrescue.co.uk www.realbusinessrescue.co.uk Keith Tully is a partner at Real Business Rescue (part of Begbies Traynor Group) and an insolvency professional with 30 years of experience in supporting company directors in financial distress. Real Business Rescue is part of Begbies Traynor Group, which recently retained its position as the UK’s leading business recovery practice with regard to total corporate insolvency appointments. The company offers comprehensive director support through its nationwide office network, including representation in Scotland, Wales, Northern Ireland and throughout England. It is paramount to understand the risks of entering arbitration proceedings with a financially distressed party and the governing law.