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Year-End Insolvency Review 2025 – What Mattered Last Year?

2025 was the year the courts set firmer ground rules. In addition to new laws, we have seen judges placing more emphasis on Schemes and Restructuring Plans, pre-packs and phoenix-type deals, and also the enforceability of foreign judgments in UK insolvency processes.

Below is a short, practical summary of what changed and why it matters.

Schemes and Restructuring Plans

A new Practice Statement for Schemes of Arrangement (Part 26) and Restructuring Plans (Part 26A) applies to hearings from 1 January 2026. The effect is substantial as much more needs to be done upfront as the courts expect a more disciplined, court-controlled process:

1. You must issue a claim form before getting a hearing date;
2. A detailed listing note is required at the outset, covering likely contested issues, time estimates, class questions and anything affecting timetable;
3. Evidence – including valuation and “relevant alternative” materials – must be substantially ready before the convening hearing;
4. Arguments, issues and grounds need to be properly developed well in advance – scrutiny is now firmly front-loaded; and
5. Creditors who want to object must do so before the hearing, to limit ambush tactics.

The result is that schemes and restructuring plans now look and feel far more like managed litigation than flexible restructuring tools. Preparation standards are much higher, timetables tighter and poorly prepared proposals are unlikely to gain momentum.

Phoenixism, Pre-Packs and Enforcement Pressure

One of our busiest areas in 2025 has been the renewed attention on pre-pack deals and directors’ conduct, as the Challenge Recruitment Group collapse has become the case everyone cites when discussing why. In brief terms:

1. There has been renewed attention on corporate structures that recycle assets through pre-packs while leaving material unsecured creditor claims – especially HMRC – behind.
2. HMRC has intensified its attention on how and why phoenixism is costing the UK billions – around 22% of the £3.8bn tax losses in 2022-23.
3. This has drawn political and regulatory scrutiny and sharpened focus on the advice given to boards and office-holders.
4. HMRC, the Insolvency Service and Companies House have been explicitly directed to work more closely to clamp down on “contrived corporate insolvencies.”

As a result, director-conduct and disqualification enforcement has become more assertive. The emphasis is on substance over form. For boards, the point at which the creditor interests must take precedence is now difficult to ignore. For advisers, restructuring strategy needs to be developed with enforcement risk in mind.

Foreign Judgments: No Fast Track to Insolvency

Another important, if quieter, development in 2025 came from Servis-Terminal LLC v Drelle. The Court of Appeal confirmed that an unrecognised foreign judgment cannot support a statutory demand or bankruptcy petition in England and Wales, and the reasoning is likely to apply equally to winding-up petitions. In doing so, it reaffirmed the core principle that a foreign judgment has no legal effect until it is recognised, whether under a statutory regime or through common-law action.

A further practical consequence of this decision is the continued emphasis to seek recognition of foreign insolvency proceedings. Insolvency practitioners appointed overseas will generally need to take an additional step to obtain recognition in England and Wales before they can exercise powers, seek relief or engage UK insolvency processes.

For all stakeholders, the message is clear that recognition process is not an optional preliminary and that foreign insolvency/proceedings do not take effect automatically in this jurisdiction.

Looking Ahead at the Emerging Pressure Points

Looking ahead, and given our combined expertise, we also set out a few areas where pressure is building (even if not driven by formal insolvency legislation):

1. Property-related exposure.
   • Obligations under the Leasehold and Freehold Reform Act 2024 and the Building Safety Act 2022 continue to bite. Contribution orders, defect-remediation duties and landlord/tenant liabilities increasingly can reduce recoveries and can influence director-conduct analysis well before formal insolvency.
2. Digital Assets, Cyber Risk and Offshore Assets
   • These developments sit alongside a growing practical focus on digital assets, including cryptoassets, whose status as “property” is becoming increasingly clearer. For insolvency practitioners, however, legal classification is only the starting point. Volatility, asset pooling, evidential complexity and the practical irreversibility of certain blockchain transactions present real challenges in tracing, securing and realising value. As with cross-border enforcement, success in this area increasingly depends on early strategy, specialist input and close coordination between legal, technical and international advisers.

The above is a snapshot of some of the issues now arising and while deeper, specific advice can be provided, the direction of travel is clear in that insolvency practice now requires not only legal judgment but also technical capability and cross-disciplinary collaboration.

To discuss any of the points raised in this review, or for more assistance with your matters, please contact Robert Kay (Partner) and Ann Goh (Associate) or fill in the form below.

This article does not constitute legal advice.

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