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June 2017 highlights from the Lexis®PSL Restructuring & Insolvency team. This month’s highlights include a look at our new materials on the Recast Regulation on Insolvency, Regulation (EU) 2015/848, which is effective from 26 June 2017 onwards, two recent cases from the EU Court of Justice in Vinyls Italia SpA and Federatie Nederlandse Vakvereniging v Smallsteps BV, together with a round up of other restructuring and insolvency news and cases.
In this issue:
Feature article: Recast Regulation on Insolvency—helpful resources
Feature article: Employees transfer in a pre-pack sale by an administrator: confirmed (Federatie Nederlandse Vakvereniging v Smallsteps BV)
Feature article: The proper interpretation of Article 13 of the EC Regulation on Insolvency (Vinyls Italia SpA v Mediterranea di Navigazione SpA)
From 26 June 2017, the bulk of the provisions of the Recast Regulation on Insolvency, Regulation (EU) 2015/848 (Recast Regulation) came into force and replaced the EC Regulation on Insolvency, Regulation (EC) 1346/2000 (the EC Regulation on Insolvency). We look at the helpful resources and materials available on Lexis®PSL Restructuring & Insolvency for R&I lawyers, including links to our updated ‘How to Guide’ for the INSOL Europe EC case register (see http://lexisnexis.blogs.local.com/randi/recast-regulation-on-insolvency-materials-available-on-lexispsl-ri/).
New forms under the Recast Regulation are set out in Commission Implementing Regulation (EU) 2017/1105. The Insolvency Service has also issued guidance on the procedural changes made under the Insolvency Amendment (EU 2015/848) Regulations 2017 (SI 2017/702) (the Implementing Regulations, also in force from 26 June 2017 onwards) as well as listing some further new forms to be issued by Companies House shortly.
Under the Implementing Regulations, the Insolvency Act 1986 (IA 1986), the Insolvency (England and Wales) Rules 2016, SI 2016/1024 (IR 2016) and the Insolvency (Scotland) Rules 1986, SI 1986/1915 are amended to make them compatible with the Recast Regulation. Provision is made for deferring dissolution of a company registered in England and Wales, Scotland or Northern Ireland where there are concurrent insolvency proceedings in another Member State. Provision is also made for two new procedures under the Recast Regulation:
Federatie Nederlandse Vakvereniging and ors v Smallsteps BV, ECJ judgment C-126/16
The exception in Article 5 of the Acquired Rights Directive relating to insolvency proceedings does not apply to the procedure in the Netherlands for a 'pre-pack' sale by an administrator. Accordingly, if such a ‘pre-pack’ sale takes place, Articles 3 and 4 apply so that the employees automatically transfer to the transferee and are protected from being dismissed, according to the EU Court of Justice.
Case C-54/16,  All ER (D) 60 (Jun)
Stefan Ramel of Guildhall Chambers examines the various issues raised in Vinyls Italia v Mediterranea di Navigazione and looks at how the EU Court of Justice interpreted Article 13 of the EC Regulation on Insolvency.
Re Nortel Networks UK Ltd and others  EWHC 1429 (Ch),  All ER (D) 94 (Jun)
The most recent decision in Re Nortel Networks UK Ltd and others clarifies the breadth of the court’s discretion to give directions to administrators in relation to expense claims and distributions to unsecured creditors. Thomas Robinson, barrister at Wilberforce Chambers, considers the background to the case and the practical implications of the judgment.
The International Association of Restructuring, Insolvency and Bankruptcy Professionals (INSOL) has published a new ‘protocol for international recognition of insolvency proceedings affecting natural persons’.
O’Keefe and another v Caner and others  EWHC 1105 (Ch),  All ER (D) 95 (May)
What is the limitation period for claims for breaches of directors’ duties under Jersey law? Tina Kyriakides of Radcliffe Chambers, analyses the Companies Court’s judgment.
The European Central Bank (ECB) has published its Opinion on the proposal for a Directive of the European Parliament and of the Council on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures and amending Directive 2012/30/EU (CON/2017/22). While welcoming the key objectives of the Directive, the ECB says it does not go far enough in harmonising national insolvency regimes and suggests some minor amendments.
Can Azerbaijan restructuring proceedings be recognised under the Cross Border Insolvency Regulations 2006 (CBIR) and if so, what form of moratorium is available? Mark Prior, Director at Squire Patton Boggs LLP, considers this interesting case.
Oraki and another v Bramston and Defty  EWCA Civ 403,  All ER (D) 174 (May)
John Briggs, barrister at South Square, examines the key issues raised in Oraki v Bramston and Defty and assesses the extent to which the judgment clarifies the law regarding the liability of trustees in bankruptcy.
Re Safier; Safier v Wardell and another (Joint Trustees in Bankruptcy of Safier) and another  EWHC 20 (Ch),  All ER (D) 72 (Jan)
When does the Secretary of State’s fee become payable in bankruptcy cases where there is third-party funding to settle the bankruptcy debts and expenses? Matthew Parfitt, barrister at Erskine Chambers, considers the implications of this landmark ruling.
The Council of the European Union has issued the final Presidency compromise text of a proposed Directive to amend the Bank Recovery and Resolution Directive (BRRD) (Directive 2014/59/EU) as regards the ranking of unsecured debt instruments in insolvency hierarchies. The aim is to remove significant obstacles in the functioning of the internal market, avoid distortions of competition resulting from the absence of harmonised EU rules on bank creditors’ hierarchy, and to prevent such obstacles and distortions from arising in the future.
In brief: CPR Part 3.1(7) applied to revoke a stay of execution (BTI 2014 LLC v Sequana S.A. Antoine)
BTI 2014 LLC v Sequana S.A. Antoine & Ors  EWHC 1339 (Ch)
Angharad Parry, barrister at 20 Essex Street, considers this case where the court considered the criteria for applying CPR 3.1(7) to vary or revoke an order already made. A stay of execution under IA 1986, s 423 had been granted to an unsuccessful defendant, due to their parlous financial state pending appeal. Within days of the English stay being ordered, the defendant obtained a pre—insolvency proceeding by the French courts resulting in a moratorium. Marcus Smith J accepted the claimant’s application to revoke the English stay, under CPR 3.1(7), on the grounds that the French proceedings rendered it otiose.
In brief: costs recoverable as a debt: are they liquidated sums? (Blavo v The Law Society)
Blavo v The Law Society  EWHC 561 (Ch),  All ER (D) 03 (May)
Klein J considered whether these sums are liquidated sums within the meaning of IA 1986, s 267(2)(b).
Alert: Business and Property Courts—official start date
The Business and Property Courts of England and Wales is the new name for England and Wales’ international dispute resolution jurisdictions, encompassing certain specialist courts and lists of the High Court, including the courts of the Chancery division dealing with insolvency. Launch events will take place in London and Birmingham in July 2017 and the courts will formally come into effect on 2 October 2017.
Calibration and implementation of circuit breaker rules under MiFID II
How will new European Securities and Markets Authority (ESMA) guidelines help trading venues across the EU implement the MiFID II circuit breaker rules? James Smethurst of Freshfields Bruckhaus Deringer explains the guidelines and how they may affect current practice.
Improving technical education—the Technical and Further Education Act 2017
What are the main changes being brought in by the Technical and Further Education Act 2017 (TAFEA 2017)? Nicola Bennison, partner at Eversheds Sutherland (International) LLP, considers the main intellectual property and insolvency implications once TAFEA 2017 enters into force.
Gauging intentions in joint beneficial ownership (Marr v Collie (Bahamas))
Marr v Collie (Bahamas)  UKPC 17
In assessing the division of a beneficial interest between an estranged couple where property is in joint names, the intentions of the parties is paramount. Graeme Fraser, a partner at Hunters, reports on the findings of the Privy Council.
 EWHC 1511 (Ch),  All ER (D) 171 (Jun)
The Companies Court ruled on an application by the joint liquidators of a company to establish whether certain sums of money were subject to charges granted by the company to the respondents, its former solicitors, to secure the latter's fixed fee for work done in international litigation concerning the company. The court held that money paid into court by the company was subject to a charge granted to the solicitors, that the charges over that money, and money formerly held by a bank on trust for the company, were floating charges, and that the conditions of IA 1986, s 245 had been met in relation to the charges. The question of valuation, under IA 1986, s 245 would be dealt with at a later date.
 EWHC 1512 (Ch),  All ER (D) 141 (Jun)
The current liquidators sought a declaration that the former administrators, and subsequently, former liquidators had misapplied, retained, or become accountable for, money or other property of the company, and/or were guilty of misfeasance, breach of fiduciary or other duty in relation to the company, under IA 1986, Sch B1, para 75 and/or IA 1986, s 212. The respondents denied that there had been dishonesty on their part and sought to settle the claim. The court ruled that an order would be made that reflected the offers, however, there would be no specific finding of dishonesty.
 Lexis Citation 1667,  All ER (D) 191 (Nov)
The Companies Court held that an administration order should be made in respect of a company and that it was appropriate to appoint administrators because there would be a better realisation in an administration, than in a liquidation. The court ruled that it had jurisdiction to retrospectively appoint the applicant administrators, who had purportedly been appointed previously, but who had applied for directions concerning the validity of that appointment. The court further ruled that it had jurisdiction, under IA 1986 Sch B1, para 79(1), to retrospectively terminate the appointment of administrators. An order was made appointing the applicant administrators retrospectively.
 EWHC 1320 (Ch),  All ER (D) 50 (Jun)
The claimant bank brought a claim against the defendant for possession of two properties in respect of which charges had been granted to the bank, as part security for loans to the defendant's company. The defendant claimed that the effect of an individual voluntary arrangement (IVA) was that the bank's claim against him was time-barred. The Chancery Division, in allowing the bank's appeal, in part, held that there had been no reason for the district judge to exclude the defendant's counterclaim based on the effect of the IVA. The court rejected the defendant's argument on limitation, in circumstances where the IVA had not been terminated by certificate, but by effluxion of time, and held that there would be a complete judgment for the bank on the defendant's counterclaim.
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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