What is the so-called "creditor duty"?
This is the duty, introduced into English common law by the leading case of West Mercia Safetywear v Dodd1 in 1988, of company directors to consider, or 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.
Background
On 22 July 2022, the English High Court sanctioned Houst Limited’s (“Houst” or the “Company”) restructuring plan (the “Restructuring Plan”), which significantly, is the first time a Restructuring Plan has been used to cram down HM Revenue & Customs (“HMRC”) as preferential creditor.1
Background
The Hong Kong Court has power pursuant to section 327 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) to wind up a foreign-incorporated company in Hong Kong. Before the Court can exercise its statutory jurisdiction, the following three well known “core requirements”, cited by the Court of Final Appeal in Kam Leung Siu Kwan v Kam Kwan Lai (2015) 18 HKCFAR 501, must be satisfied:
Since the signing of a record of meeting concerning mutual recognition of and assistance to insolvency proceedings between the courts of Mainland China and Hong Kong in May 2021, there have been a number applications for letters of request to be issued by the Hong Kong Court to the Bankruptcy Court of the Shenzhen Intermediate People’s Court.
On 12 January 2022, the English High Court granted Smile Telecoms Holdings Limited’s (“Smile” or the “Company”) application to convene a single meeting of plan creditors (the super senior creditors) to vote on the Company’s proposed restructuring plan (the “Restructuring Plan”). It is the first plan to use section 901C(4) of the Companies Act 2006 (“CA 2006”) to exclude other classes of creditors and shareholders from voting on the Restructuring Plan on the basis that they have no genuine economic interest in the Company.
Background
On the 19th of August 2021, the English High Court sanctioned a Part 26A restructuring plan proposed by the administrators of Amicus Finance plc (in administration) (“Amicus”) for the company’s solvent exit from administration, enabling the company to be rescued as a going concern (the “Restructuring Plan”).
On 29 September 2021, the English High Court rejected a challenge in respect of Caff Nero's company voluntary arrangement ("CVA"), brought by a landlord on the grounds of material irregularity and unfair prejudice. The single disgruntled landlord, with the backing of the EG Group ("EG") (who were interested in acquiring Caff Nero), argued that the directors of the company and the CVA nominees breached their respective duties in refusing to adjourn or postpone the electronic voting process to vote on the CVA, after EG had submitted an eleventh-hour offer for Caff Nero.
Key Takeaways
Key Takeaways
Two recent decisions of the Honourable Mr Justice Harris are helpful additions to the growing amount of case law in this jurisdiction dealing with cross-border insolvency issues and are worthy of examination.
Hong Kong Companies Court appoints provisional liquidators for the purpose of seeking recognition in Mainland for the first time