Frequently Asked Questions
Lloyds insurance broker, Corrie Bauckham Batts Limited (“CBB”), was placed into Creditors’ Voluntary Liquidation (“Liquidation”) by the shareholders on 20 April 2022.
John Dean Cullen and Rachel Helen Lai of Menzies LLP, 2 Sovereign Quay, Havannah Street, Cardiff, CF10 5SF, licenced Insolvency Practitioners, were appointed Joint Liquidators of CBB on this date by the shareholders and creditors at a general meeting and virtual meeting respectively.
Why have the Directors decided to take steps to place CBB into Liquidation?
The Directors took the decision to place CBB into Liquidation because of loss of income worsened by the COVID-19 pandemic and the subsequent cash flow insolvency of CBB.
It was initially anticipated that the business and assets of CBB, including the client assets, would be sold to an unconnected third party via a pre-packaged administration. Due to various reasons, this offer for the business and assets fell away in March 2022 and with it, a number of clients moved their business away from CBB.
CBB entered voluntary requirements with the Financial Conduct Authority (“FCA”) and restrictions have been placed on CBB’s activities by the FCA.
Considering all the above, it was considered that CBB had no future trading prospects and steps were taken to place the company into Liquidation.
What is a Liquidation?
A Liquidation is a formal insolvency process designed to bring the activities of an insolvent company to an end. The Liquidation will be handled by the Joint Liquidators, John Dean Cullen and Rachel Helen Lai of Menzies LLP.
The Joint Liquidators have a duty to bring in the assets of CBB, both client assets and company assets, and realise them for the benefit of creditors. They are also required to investigate the reasons for the company’s failure and report on the conduct of the Directors.
Who are the “clients” of CBB and what are the “client assets” held by CBB?
These FAQs refer to the “clients” of CBB and the “client assets” held by CBB.
For the purposes of these FAQs, client money means any money that CBB receives from or holds for, or on behalf of, a client in the course of, or in connection with, its business. Client money is money of any currency that a firm receives and holds for its client (or clients of appointed representatives, field representatives or other agents) when carrying on insurance mediation.
The client monies are segregated into client monies bank accounts.
Client money includes premiums received from clients pending payment to the insurer as well as claims monies and premium refunds that are due to be repaid to clients. In these circumstances, “clients” include the following:
- Third-party Administrator
What happens if you have monies which are in the CBB client money account?
Where a firm is holding client money, the appointment of an insolvency practitioner for certain insolvency procedures, including in a Liquidation, constitutes a ‘primary pooling event’.
Broadly speaking, this means that all client money held by CBB in client bank accounts has been notionally pooled as of 20 April 2022, forming a client money pool.
Any client money received after a primary pooling event does not form part of the client money pool and is required to be returned promptly to relevant clients or may be used to settle a pre-existing transaction to the extent such money relates to it.
The Joint Liquidator operates a separate client estate comprising client assets, against which only clients can claim. These client monies have been suitably ringfenced in the client money pool.
What are the implications of the pooling event on the client monies?
The Joint Liquidator intends to undertake a reconciliation of the client money pool whereby they will undertake a process to establish the claims clients have against the client money pool and determine each client’s entitlement to the client money at the point of Liquidation.
The client money pool will be subject to costs. The Joint Liquidator will record time and expenses spent undertaking the client monies reconciliation which will be paid from the client money pool. These are referred to as distribution costs and are the costs directly attributable to the distribution of client money. Distribution costs will be recorded and recovered in accordance with the insolvency legislation. As a result of these distribution costs, it is anticipated that there will be a shortfall to clients from the client money pool.
The current estimated outcome to clients from the client estate is 81p in the £, after distribution costs. The Joint Liquidators will shortly write to all clients to establish the claims they have against the client money pool and these claims will be compared against CBB’s records. Clients will be asked to submit claims in the client estate against the client money pool.
I have money currently held in the CBB client money account. Am I eligible to participate as an unsecured creditor in the general Liquidation estate?
If you are a client of CBB with money held in the client account, you will be treated as an unsecured creditor in the general Liquidation estate in respect of the shortfall of your client monies. Clients are considered contingent creditors in the general Liquidation estate in respect of any shortfall in client assets. To the extent that a client’s claim against the client money pool is not satisfied by any distributions made by the Liquidator from the client assets held by CBB, clients may also have a claim against the general Liquidation estate for any remaining sums outstanding. It is likely that the remaining funds owed to the clients will be treated as general unsecured creditors’ claims.
What is my claim and how is my vote treated as a contingent creditor?
Until your claim against the general Liquidation estate arising from the shortfall of client monies is calculated and agreed, you will be treated as a contingent creditor for voting purposes. The value of your contingent claim will be calculated using the estimated outcome from the client estate and the estimated shortfall.
For example, the current estimated outcome to clients from the client estate is 81p in the £. Therefore, if you have £100 in the client money pool, the value of your contingent claim in the general estate is £19, being the anticipated shortfall.
Contingent creditors have the same voting rights available to them as any other creditor.
What are the timescales for the distribution of client monies?
The Joint Liquidators will endeavour to minimise costs incurred in the distribution process and return client money to the client as soon as reasonably practicable. Clients will be given sufficient opportunity to claim their assets.
After determining entitlements to the client money pool, the Joint Liquidator must, as soon as reasonably practicable, distribute the client money to each client who is a beneficiary of the client money pool rateable to their entitlement.
Given the extent of CBB’s client monies and the nature of its record keeping, it is anticipated that a distribution will be made to clients from the client estate on a pro-rata basis within 3-4 years of 20 April 2022.
Will the FSCS cover any losses?
The FCA’s guidance is such that a client may be eligible to claim for compensation from the Financial Services Compensation Scheme (“FSCS”) for any loss incurred because of a shortfall in client assets if certain criteria are met.
The FSCS may safeguard policyholders if an authorised firm is unable, or likely to be unable, to pay claims against it, for example, if it has been placed into liquidation or administration. For example, FSCS may provide:
- A return of premium or compensation in respect of an outstanding claim.
- Compensation for insufficient cover, or if the customer is not told about a relevant exclusion in the contract, which causes the insurer to reject the claim.
- Compensation in the event of fraud, for example, if premiums are inflated.
- Compensation if a secondary intermediary becomes insolvent before passing premiums to an insurer.
Further information in respect of what the FSCS will cover can be found here: https://www.fscs.org.uk/what-we-cover/.
If I have an unsecured claim against CBB, what is the prospect of recovering my monies directly from the general Liquidation estate?
If you are a general creditor of CBB (i.e. you are not a client), you will have an unsecured claim against the general Liquidation estate.
The return of any monies will be dependent on the asset realisations in the Liquidation estate and whether there will be sufficient monies to pay a dividend.
At present, it is unlikely that there will be sufficient funds to allow a dividend to be paid to the unsecured creditors from the general Liquidation estate. The outcome for unsecured creditors will depend on the Liquidators’ investigations, the costs of the Liquidation and the total level of claims received in the estate.
What documentation will I receive from the proposed Liquidators?
The proposed Liquidators have written to all potential creditors to confirm the Directors’ intention to place CBB into Liquidation. That letter included detail regarding the process of placing a company into Liquidation and explained how creditors, including clients who are contingent creditors, can vote on the appointment of the proposed Liquidators and their remuneration.
Will the appointed Joint Liquidators be investigating the affairs of CBB?
The Joint Liquidators have a duty to consider the conduct of the directors of the company and also to consider any areas requiring investigation with a view to making asset recoveries.
The Joint Liquidators would be pleased to receive from you any information that you have about the way that CBB’s business was conducted or potential asset recoveries that you consider will assist them. Please note that this request for information forms part of the usual investigation procedure.
Will the FCA oversee the Liquidation?
During the Liquidation, CBB will continue to be regulated by the FCA. It will remain subject to supervisory oversight and the FCA’s rules. The Joint Liquidators are required to comply with all insolvency legislation.
The Joint Liquidators are authorised to act as licensed insolvency practitioners by the Insolvency Practitioners Association (IPA).
The Joint Liquidators are liaising with the FCA throughout the Liquidation.
Who and how should we contact if we require further information?
Telephone: 029 2049 5444 or 029 2067 4996
All documentation in respect of the Liquidation will be uploaded to the Joint Liquidators’ portal which can be accessed upon application to the Joint Liquidator using the contact details above. These portal details will be circulated to all potential creditors (including clients).