Environmental issues on insolvency
Environmental issues on insolvency

The following Property guidance note provides comprehensive and up to date legal information covering:

  • Environmental issues on insolvency
  • Environmental liabilities
  • Contaminated land
  • Directors
  • Lenders
  • Insolvency Practitioners

Environmental liabilities can:

  1. contribute to company insolvency and/or

  2. affect the liabilities of directors, lenders and Insolvency Practitioners (IPs) involved with the company

Environmental liabilities

Environmental liabilities include:

  1. liability arising from acts and omissions breaching a permit or conditions of a permit

  2. liability arising from the presence or escape of pollutants

Insolvency may also be caused or precipitated by suspension or revocation of an environmental permit or other licence (eg for trade effluent discharge) required for the operation of a business.

When a company becomes insolvent, its environmental liabilities continue until it is dissolved. An insolvent company can still be prosecuted for its criminal liabilities (although administrator's consent or court permission is required where the administration moratorium applies).

Contaminated land

Part IIA of the Environmental Protection Act 1990 (EPA 1990) places a duty on each local authority to inspect its land and determine whether it is contaminated and, if so, whether a remediation notice should be served to ensure clean up. Under the contaminated land regime liability for remediation attaches to:

  1. Class A persons—who caused or knowingly permitted the land to become or remain contaminated, or, if they cannot be found

  2. Class B persons—who are the current owners or occupiers of the contaminated land

The Guidance to the contaminated land (Circular 01/2006 at Annex 3) states that a party must be ‘in existence’