Background – As Things Currently Stand

The aim of EC Regulation on Insolvency Proceedings 2000 (the Regulation) is to improve the efficiency of insolvency proceedings with cross-border implications. It provides, within the EU, rules for determining:

Background

As things currently stand

The aim of the EC Regulation on Insolvency Proceedings (1346/2000) (Regulation) is to improve the efficiency of insolvency proceedings with cross border aspects. It provides, within the European Union (EU), rules for determining:

In the latest decision on COMI (Northsea Base Investment Limited & ors [2015] EWHC 121 (Ch)), the English Court had to determine the centre of main interest for a  group of companies registered in Cyprus, but where the operations of the companies were managed by a shipping agent in London.

In Allco Funds Management Limited v Trust Co (Re Services) Ltd [2014] NSWSC 1251, an inter-company loan transaction was challenged by a receiver appointed by the secured creditor to one of the companies. Common directors were involved in the transaction. The issue was whether the directors breached their fiduciary duties entitling the company via the receiver to have the transaction set aside.

The background to the case

A debtor company can seek to have a statutory demand set aside if there is a genuine dispute as to the existence or amount of the debt, or the company has an offsetting claim.

Because the threshold for contesting a statutory demand is relatively low, a creditor may decide it is better to issue the statutory demand for the undisputed portion of the total debt after making an appropriate allowance for the amount of the total debt in dispute or the amount of the alleged offsetting claim.

When a company is facing short term financial difficulties the directors or shareholders may decide to make a loan to the company to pay wages. 

The UK court recently considered the extent of s236 Insolvency Act 1986 (“IA 1986”) in the case of Re Comet Group Ltd (in liquidation); Khan and others v Whirlpool (UK) Ltd and another [2014] EWHC 3477 (Ch).

Debts claimed in statutory demands must be due and payable to the creditor named in the statutory demand.

When disputing statutory demands it is common for debtor companies to argue an offsetting claim, so as to reduce or extinguish the amount claimed in the statutory demand.

For there to be a valid offsetting claim there must be ‘mutuality’, meaning that the legal capacities in which both the offsetting claim and the statutory demand debt are each claimed and owed must align.

Key Points 

• Phones 4U went into administration in September 2014.
• Technology companies in the US have also faced a difficult market.
• Phones 4U’s complicated financing structure contributed to its downfall, as did its reliance on one or two key suppliers.
• The Protection of Essential Supplies Order will have considerable ramifications for tech suppliers when it comes into force.

PHONES 4U COLLAPSE: PART 1

A recent Victorian case has worrying implications for financiers and creditors.

A decision of the Victorian Court of Appeal in Vasudevan v Becon Constructions (Australia) Pty Ltd [2014] VSCA 14 has the potential to significantly broaden the power of a liquidator to attack a company transaction under section 588FDA of the Corporations Act 2001 (Act) where there are ‘indirect benefits’ to a director or close associate of a director of the company.