A Members Voluntary Liquidation ("MVL") is a process undertaken by a solvent company to wind up its affairs in an orderly manner when the company has concluded its activities and the shareholders wish to distribute the remaining assets amongst themselves.
To avail of a MVL, the company must be solvent i.e. the directors must be able to execute a statutory declaration that they are of the opinion that the company will be able to pay its debts in full within 12 months of the commencement of the winding up.
The steps involved
After much anticipation, the UK Supreme Court has handed down its judgment in BTI 2014 LLC v Sequana S.A. [2022] UKSC 25 - and has authoritatively set the baseline for how directors’ duties evolve as regards shareholders and creditors’ interests when a company is in the zone of insolvency.
Background
As another Irish Court year will soon commence, now is an opportune time to look back at some of the more interesting insolvency and restructuring judgments to have been delivered in the Superior Courts during the last 12 months.
The judgments explored below will prove of relevance and importance to practitioners and clients navigating distressed corporates and assets over the coming weeks and years. Please do get in touch with your Walkers Ireland Insolvency and Dispute Resolution contact or any of the contacts listed below with any comments or queries.
Global Perspectives on Insolvency, Restructuring & Dispute Resolution
As primarily offshore lawyers, we speak on a daily basis with onshore counsel, banks, asset managers, trustees, corporates, insolvency practitioners and individuals around the world. Those conversations give our Global Insolvency & Dispute Resolution Practice Group a unique perspective on the different market trends and their regional impact in 2022.
There is an expectancy of an increase in this area, together with a rise in distressed mergers and acquisitions activity, writes William Greensmyth of Walkers Ireland.
Corporate insolvency rates have been relatively low during the pandemic, but as government support measures fall away, there is an expectancy of an increase in corporate restructurings, together with an increase in distressed M&A activity.
The impact of Covid-19 is clearly the big talking point for 2022, with several questions arising: will new variants emerge, what steps will governments take to limit the spread, and what impact will it have on industries? To date, enforcement actions, insolvencies and restructurings have been relatively light, but with new restructuring legislation reforms on the horizon, and creditors starting to ramp up speed to enforcement, it appears likely that there will be an increase in winding up and cross-border restructuring work.
The Irish Government has published the details of a new 'out-of-court' rescue process for small companies, the Small Company Administrative Rescue Process or 'SCARP'. The process seeks to borrow some features from the well-established examinership rescue process, but with one fundamental difference, being the limited role of the Irish courts proposed for SCARP. The relative high cost of examinership for smaller companies has historically been found to be a barrier for entry.
The Supreme Court in Sevilleja v Marex Financial Ltd [2020] UKSC 31 has brought much needed clarity to the legal basis and scope of the so-called ‘reflective loss’ principle. The effect of the decision is a ‘bright line’ rule that bars claims by shareholders for loss in value of their shares arising as a consequence of the company having suffered loss, in respect of which the company has a cause of action against the same wrong-doer.
A recent decision of the High Court of New Zealand provides helpful guidance for insolvency practitioners on how aspects of the voluntary administration regime should operate in the context of the COVID-19 pandemic.
On 30 March 2020, the board of directors of EncoreFX (NZ) Limited resolved to appoint administrators to the company. By then, New Zealand was already at Level 4 on the four-level alert system for COVID-19.
The UK Court of Appeal has held that legal privilege outlasts the dissolution of a company in Addlesee v Dentons Europe LLP [2019] EWCA Civ 1600.
Legal advice privilege applies to communications between a client and its lawyers. The general rule is that those communications cannot be disclosed to third parties unless and until the client waives the privilege.