Introduction:

In an insolvency case involving both UK trustees and Russian Bank Creditors, the High Court issued guidance in regards to the potential breach of the 2019 Regulations surrounding sanctioned entities. The significant criminal and civil penalties potentially arising from this case make it a consequential and relevant case for UK arbitration and litigation lawyers to consider and understand. The final ruling deals with three key questions, as outlined in the court proceedings and expanded upon below.

Case Summary:

The decision confirms that an arbitration agreement will be upheld in the face of insolvency proceedings only if it can be shown that the petition debt is genuinely disputed on substantial grounds.

With many airlines having weathered the storm of the Covid-19 pandemic, one common theme with airline restructurings has been a clear reliance on the United States’ Chapter 11 bankruptcy proceedings – particularly over their domestic jurisdictions or other viable jurisdictions (such as a UK scheme of arrangement or UK restructuring plan). But when seeking to restructure, why have many airlines tended towards Chapter 11 bankruptcy proceedings as an internationally recognised restructuring procedure and shied away from the UK schemes?

A recent judgment in Kevin Hellard & Ors v OJSC Rossiysky Kredit Bank (in liquidation) & Ors [2024] EWHC 1783 (Ch) the High Court considers the ‘ownership and control’ test in Bankruptcy, involving trustee powers and Russian Bank creditors.

There have been a string of high-profile celebrity bankruptcies over the decades, and most recently, Katie Price. A common theme among these celebrities, many of whom were former contestants on the ITV hit show “I’m a Celebrity,” is that they were bankrupted by HMRC for unpaid taxes.

It is essential that any UK individual or entity doing business, managing funds/other economic resources, or providing financing or professional services, keeps abreast of the current UK Russian sanctions regime, which is chiefly set out in the Russia (Sanctions) (EU Exit) Regulations 2019 (the "Regulations"). The question of how the Regulations might apply to those with fiduciary duties – either as trustees or as directors – has been considered in two recent High Court cases.

British universities facing financial challenges and shifting enrollment patterns are considering restructuring plans in light of potential insolvencies.

When a company is in financial distress, its directors will face difficult choices. Should they trade on to trade out of the company's financial difficulties or should they file for insolvency? If they delay filing and the company goes into administration or liquidation, will the directors be at risk from a wrongful trading claim by the subsequently appointed liquidator? Once in liquidation, will they be held to have separately breached their duties as directors and face a misfeasance claim? If they file precipitously, will creditors complain they did not do enough to save the business?

What you need to know

The £150 million judgment makes clear the full impact of the trading misfeasance offence for directors.