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 Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020, which will come into force on 4 May 2021, will provide individuals with the opportunity to obtain legal protection from creditors in the form of either a breathing space moratorium or a mental health crisis moratorium. Given the economic impact of the Covid-19 pandemic, there may be a significant number of individuals seeking to obtain a moratorium to pause action against them to recover debts.

Protecting debtors

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