Recast Regulation on Insolvency (Member State to Member State)

Position of the UK

Since 31 January 2020 (exit day), the UK is no longer an EU Member State. For further details, see Practice Note: Brexit—impact on Recast Regulation on Insolvency. However, the EU Recast Regulation on Insolvency still applies between the current EU Member States (see Practice Note: List of EU member states and official languages for R&I lawyers (Member State to Member State)).

Timing of reforms

Substantial reforms were made to the Regulation (EC) 1346/2000 on insolvency proceedings (the EC Regulation on Insolvency) by Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (OJ L141/19), Recast Regulation on Insolvency (EU Recast Regulation on Insolvency). For the full text of the EU Recast Regulation on Insolvency, click here.

Although the EU Recast Regulation on Insolvency entered force on 26 June 2015, the majority of the provisions were only effective from 26 June 2017 onwards—this was to allow Member States to familiarise themselves with the new provisions (a Corrigendum was published by the EC on 21 December 2016 clarifying

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Insolvency, declarations of trust, loan agreements, artificial asset protection, sham transactions, transactions defrauding creditors, interspousal asset transfers, change of position defence and wife’s entitlement to share of husband’s assets (Sayers v Dixon)

Restructuring & Insolvency analysis: The court held that six declarations of trust (DoTs) executed by the transferor (Mr Dixon) in favour of his wife (Mrs Dixon) constituted transactions defrauding his creditors within the meaning of section 423 of the Insolvency Act 1986 (IA 1986) and that two of them, purporting to transfer all his future assets and income to Mrs Dixon, along with an accompanying loan agreement, were shams which were void and ineffective. It set aside the DoTs and ordered Mrs Dixon to restore the value of three transferred properties (which had been converted into £551,589 cash) to Mr Dixon’s trustees in bankruptcy (trustees) together with interest of £101,726. It also ordered an account to be taken of the funds that had been transferred to Mrs Dixon or on her behalf by Mr Dixon over the seven years between the date of the DoTs and his bankruptcy. The court dismissed Mrs Dixon’s defence of change of position to the trustees’ claim for restoration, finding that even if such a defence were generally available (which is unclear), she had not acted in good faith and could not rely on it. It also dismissed her defence that, having been married to Mr Dixon for many years, she was entitled to half his assets and/or an entitlement to a share of them by virtue of a right to be maintained. Written by Jonathan Lopian, barrister at New Square Chambers, who acted for the successful claimants.

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