The court process in insolvency proceedings

The court can be involved in insolvency proceedings for a number of purposes, including:

  1. opening the insolvency process

  2. issuing claims against individuals and entities to, among other things, recover property or obtain damages

  3. issuing proceedings to compel individuals and entities to co-operate with the insolvency office-holder

  4. issuing applications to obtain the court's direction on a particular issue

The court’s involvement in insolvency proceedings is to some extent subject to procedure and case management separate from the Civil Procedure Rules. In this regard, certain aspects are governed by the Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024, Pt 12 and the Practice Direction on Insolvency Proceedings (PDIP). For further information, see Practice Note: Practice Direction on Insolvency Proceedings. Regard should also be given to the Chancery Guide.

Opening the insolvency process

Insolvency proceedings commenced using the court route are typically commenced on a petition or an application to court (on notice to the debtor company or individual). Compulsory liquidations and bankruptcies are commenced by a petition (bankruptcies can also be commenced by way of an application

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High Court clarifies position of sole directors under Model Articles and the interaction between UK sanctions regulations and in-court appointment of administrators (Re KRF Services (UK) Ltd and others)

Restructuring & Insolvency analysis: This High Court case (which addresses two important issues in UK company law and sanctions regulations) will be of interest to insolvency practitioners, corporate and restructuring lawyers, sanctions lawyers, and businesses and individuals which are affected by sanctions. Firstly, it clarifies the position of sole directors under the Model Articles for private limited companies. The court ruled that a sole director can validly pass board resolutions and bind the company, regardless of whether they have always been the sole director or were previously part of a multi-member board. This interpretation resolves conflicts between Article 7(2) and Article 11(2) of the Model Articles, with the court favouring Article 7(2)'s provisions. Secondly, the case examines the interaction between UK sanctions regulations and the in-court appointment of administrators. The court determined that making an administration application and order does not breach asset-freezing sanctions, even when the company is designated or controlled by a sanctioned person. While an Office of Financial Sanctions Implementation (OFSI) license is typically required for administrators to act, the court retains discretion to make immediate appointments in urgent situations. Written by Joshua Ray and Duncan Henderson, partners at CANDEY, which acted for the First and Second Applicants on this matter.

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