The process by which a company's assets are realised for the benefit of its creditors.

Restructuring & Insolvency analysis: The Privy Council considered the classic elements of a claim for unfair prejudice under British Virgin Islands (BVI) law and what was the appropriate remedy in Yao Juan v Kwok Kin Kwok & Crown Treasure. Written by Claire Goldstein (partner in Harneys’ BVI Litigation and Insolvency team) and Romane Duncan (associate in Harneys’ Litigation, Insolvency and Restructuring practice).

A liquidation demerger involves a distribution of assets using Insolvency Act 1986, s 110 —such a demerger is sometimes known as a section 110 demerger.

FORTHCOMING CHANGE relating to capital reduction demergers and statutory demerger conditions: At Tax Update 2026, HMRC published a consultation on ‘Modernising the distributions framework’. The consultation includes a range of proposals aimed at reducing opportunities for income tax payers to extract value from companies in the form of capital rather than income. A number of the proposals will, if implemented, affect the tax treatment of demergers, including: • preventing the implementation of new holding company structures which facilitate the extraction of value as capital. Currently, the insertion of a new holding company above an existing group holding company results in the nominal value of the new holding company’s share capital being equal to the market value of the old holding company’s shares. A reduction in capital of the new holding company therefore represents a repayment of capital rather than an income distribution. The ‘New HoldCo’ structure is an essential feature of how capital reduction demergers are currently structured. The consultation proposes that share buybacks and other returns of capital ‘reflect a “frozen” amount of capital on the shares in

This is also known as a waterfall'>payment waterfall and comprises provisions which are normally set out in the articles of association of a private limited company which broadly set out the order of priority for payments to be made by a company out of its surplus assets upon a return of capital in the company, ie the order in which the company's shareholders will be paid when a company is liquidated, sold or becomes insolvent. Typically, these provisions will specifically provide that on a return of capital event, they will only apply once the company has paid all of its liabilities (including all debts) and there are surplus assets available for distribution.

Process and effect Liquidation or winding up is the process by which the affairs of a company and the company’s existence are brought to an end. When a company is liquidated: • its business is terminated, although it may need to be carried on temporarily as part of the winding up process (eg to enforce any valuable contracts) • its assets are realised (brought into a liquid form), and • the proceeds are distributed to those entitled A liquidator must fulfil this function following the duties imposed and powers granted to them under the Insolvency Act 1986 (IA 1986) and the Insolvency (England and Wales) Rules 2016, SI 2016/1024. For more information, see Practice Note: Role, powers, functions and duties of a liquidator. Forms of liquidation Liquidation may be either: • insolvent (where a company is unable to pay its debts or its liabilities are greater than its assets), or • solvent Liquidation may be commenced: • by

The insolvency practitioner who is charged with the winding up of a company and the realisation of its assets for the benefit of its creditors.

Dispute Resolution analysis: the High Court has dismissed an appeal in which a liquidator of a company sought to avoid being personally liable for success fees (or uplifts) and counsel’s fees pursuant to a conditional fee arrangement (CFA). The terms of the CFA were plain in that if the liquidator won his claim (as he did in accordance with the definition of ‘win’ in the schedule), he would pay the basic charges, disbursements and success fee of the solicitors. The CFA went on to say that the liquidator was ‘personally liable for any payments’ that he may have to make’ under the agreement. The court rejected the liquidator’s argument that he was not the client and it was in fact the company: the contractual provisions of the CFA which he had signed were clear. As such, summary judgment and an order for an interim payment of £75,000 in respect of these costs stood.

This Practice Note considers the disclaimer by liquidators of contracts (often a sale agreement or transfer) containing overage provisions, in the context of disclaimer of onerous property under section 178 of the Insolvency Act 1986 (IA 1986). It provides a summary of what overage is, the disclaimer of onerous property by a liquidator and whether overage can be considered ‘onerous property’ so that it is something that a liquidator can disclaim. It also considers the application by the court of the effect of the disclaimer of contracts containing overage in the case of Groveholt Ltd v Hughes. For more detailed reading on disclaimer of onerous property by a liquidator generally, see Practice Note: The process of disclaimer by a liquidator or trustee in bankruptcy under sections 178 or 315 of the Insolvency Act 1986. For the procedure to be adopted by a liquidator on disclaiming onerous property, see: Checklist and timeline for disclaimer—checklist. What is overage? Overage, in this context, generally refers to a mechanism whereby the seller of a

Restructuring & Insolvency analysis: Two former directors of the company in liquidation (the Company) applied under section 168(5) of the Insolvency Act 1986 (IA 1986) to set aside an assignment of claims against them to the second respondent. The application was made on the grounds that the liquidators’ decision to assign and the process by which they had reached their decision were perverse. The court held that the applicants did not have standing to apply: even if they were creditors of the Company, they had a collateral interest that transcended the interests of the creditors as a class for whom they purported to act. Further, even if they had had standing, the liquidators’ decision was not perverse. Written by Bridget Williamson, barrister at Enterprise Chambers.

Restructuring & Insolvency analysis: The court considered whether liquidators could consent to the assignment by a sanctioned creditor of contractual rights under a share sale deed without breaching the Russia sanctions regime. The High Court held that the relevant rights were ‘economic resources’, rather than ‘funds’, because their monetary value or availability was uncertain, and that the liquidators’ consent did not amount to ‘dealing’ with those resources under the Russian (Sanctions) (EU Exit) Regulations 2019 (the Regulations), reg 11(5). The decision illustrates the utility of section 112 of the Insolvency Act 1986 (IA 1986) where office-holders face sanctions-related uncertainty and develops the Court of Appeal’s reasoning in PJSC National Bank Trust v Mints by applying the uncertainty analysis beyond prospective litigation proceeds to other contingent contractual entitlements. Produced in partnership with Konstantin Bureiko, Gavin Chesney, Luke Duggan and Advaya Singh of Debevoise & Plimpton LLP.

The ease with which a particular bond can be traded, related to the size of market for that bond.