Challenges to an insolvency office-holder

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In exercising their role, duties, functions and powers, insolvency office-holders are under a duty to take reasonable care in their management of the estate's affairs, not to make a secret profit and not to act when they have a conflict of interest.

An office-holder must act in the best interests of creditors as a whole, subject to some limited exceptions, and as such must exercise a high standard of care and skill. They must always act impartially and independently.

With the exception of voluntary liquidators, office-holders will be acting as officers of the court, whether appointed in or out of court, and therefore must comply with the duty applicable to officers of the court set out in Ex Parte James (1874) 9 Ch Apt 609 (not reported by LexisNexis®) to act honourably and fairly. This will mean that a court may act accordingly if an officer of the court has taken unfair advantage and obtained unjust enrichment for the estate (or themselves) as a result of their position. The court, using its discretion, may order compensation in these circumstances.

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Latest Restructuring & Insolvency News

Council of the EU adopts position on key elements of insolvency law harmonisation directive

The Council of the EU has reached a partial general approach on crucial aspects of a proposed directive aimed at harmonising insolvency law across the EU. The agreed position focuses on preserving the insolvency estate and directors' duties in the event of insolvency and transparency obligations. Key provisions include rules on avoidance actions, asset tracing through centralised bank account registers, and aligning directors' duty to file for insolvency proceedings in a timely manner. Additionally, EU countries will be required to produce factsheets detailing their domestic insolvency laws. These measures are designed to enhance the EU's attractiveness to investors by reducing barriers to cross-border investments and improving the efficiency and predictability of insolvency procedures.

Insolvency Service reports Surrey director sentenced for fraud and concealing criminal property

The Insolvency Service has reported that Muhammadh Chaudhry, formerly known as Masood Jamati, has been sentenced to two years in prison, suspended for 22 months and disqualified as a company director for 7.5 years, for fraudulently claiming £100,000 in bounce back loans (BBL) and moving the money through his family’s bank accounts.

Commercial Court gives guidance on pleading and proving claims under section 423 of the Insolvency Act 1986 (Invest Bank PSC v El-Husseini)

Restructuring & Insolvency analysis: The Commercial Court dismissed a claim under section 423 of the Insolvency Act 1986 (IA 1986) that the first defendant (Mr El-Husseini) had transferred valuable assets to eight transferee defendants, being his family members, companies under their control and a discretionary trust, with the purpose of putting the assets beyond reach of the claimant (Invest Bank) as a potential creditor. The court held that the allegations advanced at trial were of serious wrongdoing amounting to dishonest behaviour or disreputable conduct which accordingly required a clear pleading of a sufficiently cogent case. Invest Bank had not properly pleaded in its particulars of claim the primary facts on which it sought to rely at trial in raising its case based on inference against the defendants. A positive case as to the financial difficulties of one of the key companies was only raised in a reply to the defence of one of the eight defendants. In any event, without expert accountancy evidence as to the state of finances of the key companies the court could not draw any inferences as to Mr El-Husseini’s purpose. The court also declined to draw adverse inferences from Mr El-Husseini’s failure to participate in the proceedings after a failed jurisdiction challenge, and he gave guidance on the law and practice in that regard. Written by Tiffany Scott KC, barrister at Wilberforce Chambers.

Restructuring & Insolvency weekly highlights—12 December 2024

This week's edition of Restructuring & Insolvency weekly highlights includes: clarification of the position of sole directors under the Model Articles and the interaction between UK sanctions regulations and in-court appointment of administrators (Re KRF Services (UK) Ltd), an analysis of the inalienability of occupational pensions (White v Manolete), a discussion of whether the professional indemnity insurer of an insolvent insured is to be treated in law as being liable in respect of the same damage as that for which its insured is liable for the purpose of enabling the insurer to pursue a claim to recover a contribution pursuant to the Civil Liability (Contribution) Act 1978 (Riedweg v HCC International Insurance Plc), plus a round-up of other news and cases for restructuring and insolvency professionals.

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