Lexis®PSL Restructuring and Insolvency monthly highlights—July 2016

This month’s highlights include: analysis of the decision in the Marme Inversiones 2007 SL case and whether the decision clarifies the relationship between the Insolvency Regulation and Brussels I, a timing announcement in relation to the Insolvency Rules 2016 and consideration of directors’ duties as a company approaches insolvency, plus a round up of other interesting cases and developments.

Headlines (News updates & analysis)

Carving out irreconcilable judgments under the Insolvency Regulation

Marme Inversiones 2007 SL v The Royal Bank of Scotland plc and others The Royal Bank of Scotland plc v Marme Inversiones 2007 SL [2016] EWHC 1570 (Comm), [2016] All ER (D) 182 (Jun)

Richard Bunce, partner and James Matthews, associate, at Simmons & Simmons LLP, examine in detail the judgment in the Marme Inversiones 2007 SL case and assess whether the decision clarifies the relationship between the Insolvency Regulation and Brussels I.

For further details, see News Analysis: Carving out irreconcilable judgments under the Insolvency Regulation.

Timing announcement for the Insolvency Rules 2016

At the event on 26 July 2016, Insolvency Live!, the Insolvency Service advised that there will be a six-month lead in to the commencement of the new Insolvency Rules 2016 in April 2017, subject to Ministerial approval.

For further details, see News Analysis: Timing announcement for the Insolvency Rules 2016.

When must directors start to consider the interests of creditors as a company approaches insolvency?

BTI 2014 LLC v Sequana SA & others, BAT Industries plc v Sequana SA and another [2016] EWHC 1686 (Ch), [2016] All ER (D) 96 (Jul)

The recent case of BTI 2014 LLC v Sequana SA & Ors considers the circumstances in which the directors of a company are required to consider the interests of creditors and the extent to which the payment of a dividend by a company can be susceptible to challenge under section 423 of the Insolvency Act 1986.

For further details, see News Analysis: When must directors start to consider the interests of creditors as a company approaches insolvency?.

Making the case for validation orders

Express Electrical Distributors Ltd v Beavis and others [2016] EWCA Civ 765, [2016] All ER (D) 118 (Jul)

Does the Court of Appeal’s recent decision in Express Electrical Distributors v Beavis clarify the issue of validation orders under the Insolvency Act 1986 (IA 1986)? James Davies, a barrister at 3PB who specialises in commercial and insolvency matters, considers the implications of the judgment.

For further details, see News Analysis: Making the case for validation orders.

UNCITRAL Model Law adopted

The United Nations Commission on International Trade Law (UNCITRAL) adopted the UNCITRAL Model Law on Secured Transactions, from 1 July 2016. The Model Law was adopted at the UNCITRAL session in New York (see press release).

Bankruptcy orders and the mutual assistance regime

The decision in Revenue and Customs Commissioners v Smart establishes the principles to be applied when a bankruptcy court is asked to go behind a judgment and when it is alleged that an offer to secure or compound has been unreasonably refused, as Katherine Hallett, barrister at Three Stone explains.

For further details, see News Analysis: Seeking costs for examinees at a private examination.

Proposed insolvency regime for FE and sixth-form colleges

The Department for Business, Innovation and Skills and the Department for Education are seeking views on proposals for setting up an insolvency regime for further education institutions and sixth-form colleges. The proposals include a Special Administration Regime, giving extra protection to ensure continuity of service. The consultation closes on 5 August 2016 (see consultation).

Seeking costs for examinees at a private examination

Katherine Hallett, a barrister at Three Stone, considers the decision in Re Saad Investments which concerned the circumstances in which the court will award an examinee their costs of representation at a private examination.

For further details, see News Analysis: Seeking costs for examinees at a private examination.

Limitation and alleged breaches of duty

In the case of Burnden Holdings (UK) Ltd v Fielding, the Court of Appeal had to determine the relevant limitation period in a claim in respect of alleged breach of duty by two directors. Marc Brown, barrister at St Philips Chambers, explains the background to the appeal and implications of the judgment.

For further details, see News Analysis: Limitation and alleged breaches of duty.

Examining the correct basis of valuation

Where a debtor’s share transfer is void and the shares are returned but now have a lower value, is the trustee in bankruptcy entitled to the value of shares as per the date of the transfer? Francis Collaço Moraes, barrister at Three Stone, explores the Chancery Division’s decision in Ingram v Ahmed.

For further details, see News Analysis: Examining the correct basis of valuation.

South Square Digest—August 2016

The March edition of the South Square Digest is now available, see: South Square Digest—August 2016.

Permission to appeal after debarment

Can a defendant who had been conclusively debarred from defending a claim be granted permission to appeal against the substantive judgment of the claim? Nathan Capone, associate at Fieldfisher, looks at how the Chancery Division dealt with that issue in Hall v Elia.

For further details, see News Analysis: Permission to appeal after debarment.

Postponing the sale of a bankrupt’s home

Edward Rowntree, barrister at Hardwicke, considers the discretion afforded to judges to postpone the sale of a bankrupt’s home in light of the decision in Grant v Baker where the High Court overturned the indefinite postponement of sale ordered by a judge seeking to protect a vulnerable individual residing at the property.

For further details, see News Analysis: Postponing the sale of a bankrupt’s home.

New fees for bankruptcy and company insolvency

The Insolvency Service has announced that fees charged to apply for bankruptcy and company insolvency are changing from 21 July 2016. Deposit and administration fee will remain, and a new official receiver’s General Fee will be introduced. This will replace the current Secretary of State fee, which will no longer apply to cases where orders are made on or following the commencement date (see press release).

Protecting prepayments when a retailer goes insolvent

The Law Commission has published a report following a project on consumer prepayments on retailer insolvency. The project, commissioned by the Department for Business, Innovation and Skills, considered whether greater protection is needed for consumers who lose deposits or gift vouchers when retailers become insolvent. Among other things, the Commission found a lack of protection for consumers making prepayments, as highlighted by recent big retailer insolvencies. It has made recommendations, including regulating Christmas and similar savings schemes, which pose a particular risk to vulnerable consumers (see report).

Guidance on company dissolution and restoration updated

Guidance for directors, secretaries of company advisers on how to dissolve a company or restore it to the register has been updated by Companies House, as a result of The Small Business, Enterprise and Employment Act 2015 (see guidance).

Relevant updates from other practice areas

Brexit

Brexit and Material Adverse Change clauses

David Campbell, a partner in Allen & Overy’s banking department, considers whether the result in the EU referendum means that Material Adverse Change clauses (MACs) are triggered in credit agreements and mandate letters. For further details, see News Analysis: Brexit and Material Adverse Change clauses.

What does the referendum result mean for borrowers and lenders?

What are the immediate issues for existing loan agreements following the EU referendum result? David Varnham, partner and head of banking at Mills & Reeve, considers the next steps for borrowers and lenders and the implications for existing and future financial documentation. For further details, see News Analysis: What does the referendum result mean for borrowers and lenders?.

The post-referendum landscape for shipping finance

Stephen Marais, partner at Holman Fenwick Willan, considers the possible implications Brexit could have on the shipping finance markets. For further details, see News Analysis: The post-referendum landscape for shipping finance.

Implications for aviation finance post-Brexit

Paul Holland, partner at Dentons examines the implications of the UK’s decision to leave the EU on the aviation finance market and what impact it could have on existing deals and cross-border arrangements. For further details, see News Analysis: Implications for aviation finance post-Brexit.

Cases

Bailey and another v Angove's Pty Ltd [2016] UKSC 47, [2016] All ER (D) 147 (Jul)

Abstract: The Supreme Court, in allowing an appeal by an Austrian wine-making company (APL), held that APL's notice to another company (D&D), which had distributed wine as APL's agent in the United Kingdom, had been immediately effective to terminate D&D's authority to collect on outstanding invoices. It was declared that the proceeds of the invoices were payable to the company.

Re Ralls Builders Ltd (in liquidation); Grant and another v Ralls and others [2016] EWHC 1812 (Ch), [2016] All ER (D) 113 (Jul)

Abstract: The Chancery Division ruled that, having found that the joint liquidators' application, under section 214 of the Insolvency Act 1986, for a contribution from the directors of a company on a wrongful trading claim, had failed, it would not be appropriate to make the directors pay a contribution to the assets of the company in respect of the joint liquidators' fees and expenses in investigating and pursuing that unsuccessful claim.

AB Agri Ltd v Curtis and others [2016] Lexis Citation 510, [2016] All ER (D) 121 (Jul)

Abstract: The County Court in Bankruptcy allowed the applicant company's challenge to an individual voluntary agreement, where an insolvency practitioner had erred in valuing the applicant's claim at £1 and/or rejecting it altogether. That had been a material irregularity within section 262(1) of the Insolvency Act 1986.

Evans and another v Jones and another [2016] EWCA Civ 660, [2016] All ER (D) 36 (Jul)

Abstract: The Court of Appeal, Civil Division, allowed the joint liquidators' appeal against a judgment that had ruled on their application under section 239 of the Insolvency Act 1986. The judge had erred in having taken into account, in assessing the solvency of the company, a dividend that had been paid to the defendant director/shareholders which had been shown during the course of the liquidation to have been an unlawful dividend.

Re Ahmed (A Debtor) Ingram and another v Ahmed and others [2016] EWHC 1536 (Ch), [2016] All ER (D) 11 (Jul)

Abstract: The Chancery Division granted the applicant trustees in the bankruptcy of the first respondent relief under section 284 of the Insolvency Act 1986 after he had transferred his minority shares in a company to the second respondent following the presentation of a bankruptcy petition. The respondents had argued that the monetary relief sought by the trustees was unprecedented where the asset, namely the shares, had been returned and that the trustees had failed to plead or prove actual loss. The court held that the trustees had not been not required to plead actual loss and that the second to the fifth respondents had not acted in god faith and were jointly liable for the loss caused, namely the devaluation of the shares. The court held that the trustees were entitled to relief in the form of a fair value of the shares as at the date of the transfers.

Dates for your diary

Date Time Subjects covered
1 August 2016 Third Parties (Rights Against Insurers) Act 2010 comes into force

About this blog post

This is a shortened version of the LexisPSL Restructuring and Insolvency Monthly Highlights which was first published on LexisPSL Restructuring and Insolvency.

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