The Facts

The application relates to the estate of Jillian Mascall (the “Deceased”), which owned around 27 properties. The Deceased died on 4 December 2014 and it later became apparent the estate was insolvent.

Background

The claimant, Close Brothers Ltd (“Close”), a London based bank, sought to enforce its right to sell the defendant’s, AIS (Marine) 2 Limited (“AIS”) secured property following AIS’s default on repayment of a loan. The asset in question was a vessel and AIS mortgaged shares in the vessel to Close in order to secure a loan of €2,247,000 (the “Loan”). The purpose of the Loan was to assist AIS in purchasing the vessel, which cost €3,210,000.

Agreement

The Consultation

In March 2018, the Government published a consultation on its proposed reforms to the UK’s insolvency and corporate governance landscape. It sought views on ways to reduce the risk of company failures occurring through poor governance, whilst improving the insolvency framework to create a stronger business environment. The Government has now published its response to the consultation and we consider the key changes below.

Parent Company Director Accountability

The Eleventh Circuit recently found in favor of Blue Bell Creameries, Inc. by rejecting its own earlier dicta and explicitly expanding the preference payment defense known as “new value.” This provides additional protection for companies doing business with a debtor in the 90 days prior to bankruptcy.

THE SCOOP: BRUNO’S V. BLUE BELL

Introduction

Background to the Case In this case, the High Court scrutinised the conduct of the administrators appointed by a secured lender, Dunbar Assets plc, over a company, Angel House Developments Limited, whose sole asset was an office block in the London Docklands. The sole shareholder of the company had accused the administrators of breaching a number of duties.

Background to the Case

On May 22, 2018, the United States Court of Appeals for the Fifth Circuit issued its decision in Franchise Services of North America v. United States Trustees (In re Franchise Services of North America), 2018 U.S. App. LEXIS 13332 (5th Cir. May 22, 2018). That decision affirms the lower court’s holding that a “golden share” is valid and necessary to filing when held by a true investor, even if such investor is controlled by a creditor.

The Facts

Mr Walker (the “First Respondent”) was appointed as liquidator of Domestic & General Insulation Limited (the “Company”) under the member’s voluntary liquidation procedure. Several months later the liquidation of the Company was converted into a creditor’s voluntary liquidation and Scott Bevan and Simon Chandler (together, the “Applicants”) were appointed as joint liquidators. The appointment took place during a creditors meeting which was convened by the First Respondent.

The Circuit Courts of Appeal have split on whether a prepetition transfer made by a debtor is avoidable if the transfer was made through a financial intermediary that was a mere conduit. Today, the Supreme Court unanimously resolved the split by deciding that transfers through “mere conduits” are not protected. This is a major (and adverse) decision for lenders, bondholders and noteholders who receive payments through an intermediary such as a disbursing agent.