Monthly Update - March 2014

Monthly Update - March 2014

Welcome to this month's highlights. There are a number of interesting case updates and news analysis from this month put together by the Restructuring and Insolvency team at LexisPSL. Find out more below.


Below is a round-up of some of the key cases reported in March.

When is a share not a share?

In Fons HF (in Liq) v Pillar Securitisation S.à.r.l, the Court of Appeal held that a shareholder loan agreement could constitute a ‘debenture’ as it is an instrument which evidences a debt. The effect of this decision was to bring two shareholder loan agreements within the meaning of debenture within the definition of ‘shares’ under a legal charge and so were part of the secured property available to Kaupthing as the secured creditor under the Kaupthing legal charge. Borrowers and their lawyers should revisit the definition of ‘Shares’ in any security document taking security over shares, to check if a shareholder loan agreement would be caught or remains outside the security net.

For further details, see Banking & Finance News Analysis: When is a share not a share?

Judgment in the Lehman waterfall case

Following his earlier statement of conclusions, on 14 March 2014 David Richards J gave a full reasoned judgment in Re Lehman Brothers International (Europe) (in administration) which addressed a number of issues arising from the likelihood of a surplus in the estate of Lehman Brothers International (Europe) (LBIE) after payment of all proved debts. Richards J gave his reasoning for the following decisions:

• LBIE's members (two other Lehman group companies, LBHI2 and LBL) have a very wide obligation to contribute on liquidation under the Insolvency Act 1986, s 74(1) (IA 1986) as LBIE is an unlimited company. Accordingly, the members must contribute to:
◦ proved debts
◦ statutory interest on the proved debts
◦ unproved liabilities
• the (i) contributory rule (that a contributory/member can't recover anything until he has fully paid any obligations as contributory) and (ii) equitable rule in

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About the author:
Kathy specialises in restructuring and cross-border insolvency. She qualified as a solicitor in 1995 and has since worked for Weil Gotshal & Manges and Freshfields. Kathy has worked on some of the largest restructuring cases in the last decade, including Worldcom, Parmalat, Enron and Eurotunnel.