This article was first published in Getting the Deal Through - Ship Finance: Updates and Trends and is reproduced with permission.

The terms of the UK’s withdrawal from the EU will inevitably dictate the extent to which Brexit impacts upon financial agreements. As this stage, it is important to consider the clauses which may have to be reviewed.

Most trading contracts contain specific terms setting out the consequences of a counterparty insolvency or other default. This article explores whether, and in what circumstances, it may be sensible to invoke rights under such clauses or whether it can be better to adopt a more “wait and see” attitude. We also look at drafting options prior to finalising contract terms.

When considering how to respond to a counterparty event of default (EOD), relevant considerations will include potential consequences:

In the recent case of Greece v Stroumpoulis on 25 February 2016, the European Court of Justice (ECJ) decided that EU protections under the Insolvency Directive apply to EU residents working in the EU, regardless of whether their employer is an EU company. The ECJ reached this decision based on the social objective of the Insolvency Directive, irrespective of the maritime waters on which the vessel sailed.

The Office of the Director of Corporate Enforcement (ODCE) has published its Annual Report for 2015.

Key Developments from the Report: 

This case¹ concerned a challenge to a High Court judgment which was entered against Mr Hanley for failure to repay monies borrowed pursuant to a loan agreement. Mr Hanley asserted that he had never received a letter of demand for repayment of the loan monies borrowed. The Court noted that the notice of demand went, in error, to another Mr Hanley that had no connection to the Defendant.

In Leahy v Doyle & anor [2016] IEHC 177, the High Court issued orders of restriction in respect of directors of two companies (Gingersnap and Scappa), under Section 150 of the Companies Act 1990 (now Section 819 of the Companies Act 2014). While the companies were different, the liquidator and the directors were the same.

Background 

In McAteer & anor v McBrien & ors [2016] IEHC 229, the High Court made an order restricting three directors pursuant to Section 150 of the Companies Act 1990 (now Section 819 of the Companies Act 2014).  The first named respondent (A) was the husband of the second named respondent (B) and father of the third named respondent (C) and all were directors of the Company on the date of the liquidation.

Background

On 28 April 2016, the Third Parties (Rights against Insurers) Act 2010 (Commencement) Order 2016 was made. It provides for the Third Parties (Rights against Insurers) Act 2010 (the New Act) to come into force on 1 August 2016.

The High Court (Binchy J), has recently made restriction orders in respect of directors in two separate applications before it.

In Murphy -v- O'Flynn & anor [2016] IEHC 197 a liquidator sought an order from the Court restricting William and Deirdre O’Flynn from acting as directors pursuant to Section 150 of the Companies Act 1990.

Applicable Law