Introductory remarks
Directors of companies incorporated in England and Wales must be mindful of their duties and responsibilities to the company as well as the potential personal liability that could arise from breaching those duties and responsibilities in the context of an insolvency.
With the current financial difficulties faced by the oil & gas industry, this issue is especially pertinent to that sector.
In April 2015, the Supreme Court dismissed an appeal bought by The Trustees of the Olympic Airlines SA Pension and Life Assurance Scheme ("the Scheme") and held that Olympic Airlines SA ("Olympic Airlines") did not have an "establishment" in the UK when the Trustees presented a winding up petition in England on 20 July 2010.
The significance of the decision is that without a "qualifying insolvency event", the Scheme would not enter the Pension Protection Fund ("PPF") and is of significance for any defined benefit pension scheme of a UK branch office of an overseas company.
In addition to the general insolvency measures found in the Insolvency Act 1986, insurance intermediaries are subject to specific client money rules, which have a particular effect if they become insolvent. Though in the context of investment firms rather than the insurance sector, the recent UK Supreme Court case of Lehman Brothers International (Europe) (in administration) v CRC Credit Fund and ors [2012] UKSC 6 (LBIE) is a useful decision against which to consider the application of many of these client money rules.
Given the nature of their businesses, shipping companies may be involved as respondents in arbitration proceedings in different jurisdictions. As arbitrations tend to be lengthy procedures, a claimant to such proceedings may want to explore whether there are any quicker routes they can take to recover their losses. One such option they might consider is bringing a winding up petition against the company.
In the past decade, Chapter 11 practice has witnessed the rise of a new phenomenon: structured dismissals.1 Broadly speaking, the term structured dismissal is an umbrella term for a dismissal order that includes additional bells and whistles, such as releases, protocols for claims administration or provisions permitting the gifting of assets to junior stakeholders. Like a Chapter 11 plan, a structured dismissal often identifies how proceeds are to be distributed while retaining jurisdiction in the bankruptcy court for claims administration and other specified matters.
On May 26, 2015, the U.S. Supreme Court issued its ruling in Wellness International Network, Ltd., et al. v. Sharif.1 The Wellness decision clarifies one of the most significant open issues created four years ago by the Court’s highly controversial decision in Stern v.
In a May 4, 2015, decision, the U.S. District Court for the Southern District of New York rejected secured lenders’ appeals of a controversial bankruptcy court decision confirming the Chapter 11 plan of reorganization of MPM Silicones, LLC (also known as “Momentive”). The district court opinion, by Judge Vincent Briccetti, affirms the bankruptcy court’s decision that Momentive’s senior secured lenders could be “crammed down” at a below-market interest rate, without payment of a make-whole premium.
The slide and volatility in the oil price over the past few months has been dramatic and whilst many companies will be well positioned to weather the current climate, it has already become clear that there are some players in the industry for whom insolvency is a very real risk.