The English Cases —Further Extension of UK Scheme of Arrangement for the Benefit of Foreign Companies
Summary
Following the US case of Morning Mist Holdings when a Court of Appeals decided that COMI had to be analysed on the date of the Chapter 15 case petition, we look again at the case of Kemsley where the US bankruptcy court held that COMI had to be analysed on the date of the filing of the UK bankruptcy. We consider whether this could have affected the outcome of the Kemsley case and look at the factors used by the English and US Courts to interpret an individual debtor’s COMI.
Background
Earlier this week, the English Court of Appeal overturned the recent decisions in Goldacre (Goldacre (Offices) Ltd v Nortel Networks UK Ltd [2009] EWCH 3389 (Ch);2011 Ch 455) and Luminar (Leisure (Norwich) II Ltd v Luminar Lava Ignite [2012] EWCH 951 (Ch)) regarding the treatment of rent in an administration.
On 4 February 2014, our client, Zlomrex International Finance S.A. (“ZIF”), completed the restructuring of its approximately €118 million senior secured high yield notes due 2014 (the “Existing High Yield Bonds”). ZIF, a company incorporated in France, is a financing vehicle for the Cognor group, one of the largest suppliers (by volume) of scrap metal, the second largest seller of semi‑finished steel products and the fifth largest seller (by volume) of finished steel products in Poland.
On 12 December 2013, our client, Magyar Telecom B.V. (the “Company”), a Dutch holding company of the Invitel group of companies (the “Group”) and one of the leading telecommunication services providers in Hungary, completed the restructuring of its €345 million 9.5% Senior Secured Notes due 2016 (the “Notes”).
In Crystal Palace FC Ltd v Kavanagh & Ors [2013] EWCA Civ 1410, the Court of Appeal considered whether dismissals made by an administrator to keep a business alive with the ultimate aim of selling it were automatically unfair under TUPE, in which case liability would pass to the buyer.
The world is getting smaller. The number of people who hop from country to country throughout their lives is increasing. Inevitably, when a jet-setting life becomes financially troubled, bankruptcy and other court proceedings are likely to be similarly international. Two cases involving the same parties were heard in both the High Court in London and the US Bankruptcy Court for the Southern District of New York. See Kemsley v Barclays Bank Plc & Ors [2013] EWHC 1274 (Ch) (15 May 2013), 2013 WL 1904308, and In re Kemsley, 489 B.R. 346 (Bankr. S.D.N.Y. 2013).
UK Supreme Court decision confirms traditional rules on enforcement of all US judgments in England and reverses a significant liberalisation of cross-border bankruptcy law.
For more than a century, courts in England and Wales have refused to recognize or enforce foreign court judgments or proceedings that discharge or compromise debts governed by English law. In accordance with a rule (the "Gibbs Rule") stated in an 1890 decision by the English Court of Appeal, creditors holding debt governed by English law may still sue to recover the full amount of their debts in England even if such debts have been discharged or modified in connection with a non-U.K.
Are you prepared to take advantage if one of your competitors falls into difficult times or enters an insolvency process? Do you know your way around buying from a distressed seller? What are the things you need to know? How can you prepare? What will make your bid most attractive?
Recent high profile collapses such as HMV have highlighted the opportunities that can be found within the distressed space – if you are prepared and know how to act swiftly.