Introduction

Today, the UK Supreme Court considered for the first time the existence, content and engagement of the so-called “creditor duty”: the alleged duty of a company’s directors to consider, or to act in accordance with, the interests of the company’s creditors when the company becomes insolvent, or when it approaches, or is at real risk of, insolvency.

The High Court in London gave judgment on Friday, 3 July 2020 on the relative ranking of over $10 billion of subordinated liabilities in the administrations of two entities in the Lehman Brothers group.

The recent decisions in Re MF Global UK Ltd and Re Omni Trustees Ltd give conflicting views as to whether section 236 of the Insolvency Act 1986 has extra-territorial effect. In this article, we look at the reasoning in the two judgments and discuss a possible further argument for extra-territorial effect.

The conflicting rulings on section 236

On November 7, 2014, the City of Detroit’s historic Chapter 9 municipal bankruptcy case culminated with the confirmation of the City’s proposed plan of adjustment (after eight amendments), and the approval of various related settlements. Although little more than a month has passed, a great deal of ink has already been spilled on what the City’s bankruptcy case means, particularly from the viewpoint of the municipality and its citizens.

On Saturday, June 28, Puerto Rico Governor Alejandro Garcia Padilla signed into law the euphemistically-named “Puerto Rico Public Corporation Debt Enforcement and Recovery Act” (the “Act”).