Capital markets transactions which were put on hold following Government proposals to abolish administrative receivership can now proceed following the announcement that deals closed before the law comes into force will not be affected by the changes.
The Government last week confirmed that secured lenders that have entered into a loan agreement and taken floating charge security before the Enterprise Bill becomes law will still be able to appoint an administrative receiver.
Lovells banking partner Geoffrey Yeowart, who has been lobbying the Department of Trade and Industry (DTI) on behalf of the City of London Law Society's bank lending sub-committee, said that bankers and lawyers can all breathe a sigh of relief.
“We're very happy with the announcement that has been made,” he said. “However, there's still more work to be done. The next step is to work on cave outs [exemptions] for capital market transactions and to look at the proposals for streamlining the administration procedures.”
“The Australian model has made administration favourable by making it easy to appoint an administrator”
Geoffrey Yeowart, Lovells
He said that the DTI should look to the Australian model, which gives secured creditors the choice between appointing a receiver or an administrator.
“The model has made administration favourable by making it easy to appoint an administrator,” he said.
The enterprise white paper, which was published in July, confirmed the Government's plans to streamline the court-based administration procedure and make it the principal means of enforcing security over a company's assets.
The paper states that the right to appoint an out-of-court administrative receiver will be restricted to the holders of floating charges in connection with certain capital markets deals. However, it does not make clear which capital markets transactions it is identifying.
The banking law sub-committee has sent a written response to the DTI, which claims that, despite understanding the principal behind the proposals, it believes that the method is misconceived.