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In what circumstances will the court be prepared to appoint provisional liquidators where the EC Regulation on Insolvency comes into play? Caroline Waterworth of Ten Old Square Chambers considers the decision in Re Arms Asset Backed Securities and says the English courts are increasingly confident in their use and interpretation of the EC rules.
Re Arm Asset Backed Securities SA  EWHC 1097 (Ch),  All ER (D) 88 (Apr)
A winding up petition was presented to the Chancery Division in respect of a company in the United Kingdom. Joint provisional liquidators were appointed and the English court ordered that the English provisional liquidation of the company was a main proceeding within Council Regulation (EC) 1346/2000, art 3(1) (EC Regulation on Insolvency). A public prosecutor in Luxembourg applied to a court in Luxembourg for the commencement of a liquidation proceeding in respect of the company there. The Chancery Division granted the joint provisional liquidators’ application for a declaration that the public prosecutor’s application was stayed by the Insolvency Act 1986, s 130(2) (IA 1986).
What is the relevant chronology?
ARM Asset Backed Securities SA (the company) was incorporated in Luxembourg and carried on the business of raising funds through the issue of bonds governed by Luxembourg law and the investment of those funds in the purchase of life insurance policies in the US. After carrying out business for a number of years, the company took advice on recognition and regulation in Luxembourg and applied for recognition in 2009. The Luxembourg regulator declined to grant the necessary licence in 2011 and had a Supervisory Commissioner appointed to the company to monitor it.
The refusal of the licence was appealed by the company but that was finally dismissed in August 2013. By that time, the company was no longer actively engaged in business but having already invested in the US insurance market, it continued to receive funds from the policies that had been purchased in order to service and repay the bonds.
After the company appeal was dismissed, the Luxembourg regulator indicated that it had asked the Luxembourg public prosecutor to apply to the Luxembourg district court for an order for the dissolution or liquidation of the company.
No such steps had been taken before the company took the decision to apply to wind up the company on a just and equitable basis and for the appointment of provisional liquidators. The company duly presented a winding-up petition in the High Court on 7 O
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