Directors beware—payment of dividend can contravene section 238 of the Insolvency Act 1986 (Taqa Bratani Ltd v Fujairah Oil and Gas UK LLC (formerly known as Rockrose UKCS8 LLC)
Restructuring & Insolvency analysis: The Court of Appeal held that payment of a dividend (in the sum of USD $84.7m) by Rockrose UKCS8 LLC (UKCS8) around the time that a share purchase agreement (SPA) was agreed between its parent company, RockRose Energy Limited (Rockrose), and Fujairah International Oil & Gas Corporation (FIOGC) under which Rockrose agreed to sell its membership interest in UKCS8 to FIOGC was in contravention of section 238 of the Insolvency Act 1986 (IA 1986). The Court of Appeal clarified that the ‘transaction’ in this case was the payment of the dividend, an afterthought decided upon after the SPA was agreed. It dismissed the argument that the dividend payment was made in good faith for commercial benefit, holding that the benefit of the dividend payment was attributed to RockRose, and not UKCS8. Written by Anamitra Mukhopadhyay, associate, Restructuring & Insolvency, Trowers & Hamlins LLP.