Some further important guidance by Zacaroli J in the recent judgment on Hurricane Energy. In that case, the company (with the support of the company's ad hoc committee of bond holders who were going to take 95% of the equity under the plan in return for certain adjustments to the bonds) sought to cram down the class of dissenting shareholders through a restructuring plan ("plan").
This case is a reminder to both debtors and nominees that corporate law formalities must be respected and that the insolvency lens may affect the treatment of connected party transactions in future valuations and restructuring processes.
The Regis landlords made multiple complaints regarding the disclosure and valuation of connected party transactions and the large uniform discount applied to multiple landlords for voting purposes (75%). The only argument found in their favour was the mistreatment of one of the intercompany loans.
Key takeaways -
Legal claims can only be brought within the applicable limitation period prescribed by the Limitation Act (1996 Revision). A defendant to any claim that is time-barred has a complete defence. Prior to the recent decision ofRitchie Capital Management LLC et al (Ritchie) v Lancelot Investors Fund Ltd (Lancelot) and General Electric Company (GE), it had been generally understood that the Cayman approach to claims against companies in liquidation would follow the English position on the issue of limitation.
Rumours that a company is in the zone of insolvency may create a race to the assets, with potential creditors or interested parties commencing proceedings in an attempt to secure payment from the company before its assets are fully dissipated or tied up in the insolvency process. This can destroy the collective value in the enterprise or scupper a restructuring and result in significant duplicative costs.
