Summary: In EPC Constructions India Ltd. v. Matix Fertilizers & Chemicals Ltd., the Supreme Court addressed whether holders of non-cumulative redeemable preference shares can initiate insolvency proceedings under Section 7 of the IBC, as financial creditors. The Court held that preference shareholders are not creditors and cannot trigger insolvency proceedings, as preference shares remain part of the share capital even upon maturity, and conversion of debt into preference shares permanently extinguishes the original creditor relationship.
The Insolvency and Bankruptcy Code, 2016 (“IBC”), was enacted to inter alia provide a consolidated framework to resolve insolvency in a time-bound manner and to maximise the value of assets. This objective is further aided by a moratorium under Section 14 that halts legal proceedings against the corporate debtor, and the immunity provision under Section 32A, which offers a fresh slate to resolution applicants upon plan approval.
In March 2015 the major high street retailer British Home Stores (BHS) was acquired for £1 by Retail Acquisitions Limited (RAL), a company owned by Mr Dominic Chappell. Mr Chappell became a director of the BHS entities upon completion of the purchase, together with three other individuals.
In Mitchell and others v Al Jaber; Al Jaber and others v JJW Ltd [2024] EWCA Civ 423 the Court of Appeal has confirmed that a director remained subject to a continuing fiduciary duty post liquidation when purporting to transfer assets owned by that company, on the basis he was an “intermeddler”. While the case concerned a BVI company, the court’s decision was based on English-law authorities and therefore has wider significance.
Facts
Introduction
For initiating proceedings under the Insolvency and Bankruptcy Code 2016 (“IBC”), categorisation of a creditor as either a “financial creditor” or an “operational creditor” is a rather significant first step. Such categorisation is not merely organisational, but essential since the rights, obligations and procedural requirements for realisation of debt by financial and operational creditors also differ under the IBC.
In the recent case of Loveridge v Povey and Ors [2024] EWHC 329 (Ch) a company shareholder sought to challenge the administrators’ decision to rescue a balance sheet solvent company as a going concern by securing additional funding, as opposed to pursuing a sale of the business.
Background
McDermott restructuring plan approved amidst parallel settlement negotiations
The English court has given the green light to the restructuring plan (the Plan) proposed by CB&I UK Limited, part of the McDermott Group, marking the first such approval since the Court of Appeal’s pivotal decision in the Adler case (see our previous update).
The Court of Appeal has handed down judgment in the case of Humphrey v Bennett, providing some useful guidance on the nature and scope of a director’s duty to avoid conflicts of interest. The case was an appeal against summary judgment of the High Court following a derivative claim brought on behalf of a company by minority shareholders. The case will be of particular interest to directors of smaller companies whose management structures very often operate on a more informal footing.
Outcome of the UK government's market consultation and the likely shape and impact of the proposed regime