Background

The German Insolvency Act says an insolvency administrator may sell a "moveable object" on which a right to separate satisfaction (Absonderungsrecht) exists if such object is in his possession. The right to separate satisfaction entitles creditors with such a right to be satisfied ahead of all other creditors from the proceeds of selling a separate pool of assets within the insolvent estate

Background

In cases where upstream or cross-stream securities are granted by a German limited liability company (”GmbH“), the German capital maintenance rules need to be considered. Under these rules assets that are required for the maintenance of GmbH’s registered share capital may not be paid out to the shareholders. This payout prohibition concerns not only payments, but also granting of securities in favour of loans granted to the shareholders. The managing directors of a GmbH are personally liable for payouts made in violation of these rules.

On 22 April 2015, the Supreme Court handed down its decision in Jetivia SA v Bilta (UK) Limited, unanimously holding that where a company has been the victim of wrong-doing by its directors, that wrong-doing should not be attributed to the company so as to afford the directors an illegality defence.

The result is clear and not a surprising one. The judgments are less clear however. The Court highlighted the difficulties in developing illegality principles of general application for future cases, but then decided now was not the time to try.

Illegality, attribution of knowledge, and Stone & Rolls: Jetivia SA v Bilta (UK) Limited

On 22 April 2015, the Supreme Court handed down its decision in Jetivia SA v Bilta (UK) Limited¹, unanimously holding that where a company has been the victim of wrong-doing by its directors, that wrong-doing should not be attributed to the company so as to afford the directors an illegality defence.

Blue Monkey Gaming v Hudson & Others

Insolvency professionals will welcome the High Court's decision in Blue Monkey Gaming Limited v Hudson & Others [2014] which is clear authority that the onus is upon retention of title claimants, not administrators, to locate and identify retention of title goods. The court made clear that to require the administrator to identify retention of title goods would be "totally unrealistic and practically unworkable."