The Government has announced that it will legislate to prohibit the enforcement of certain contractual termination clauses ('ipso facto clauses').
As with other aspects of the response to recent insolvency and corporate governance consultations, this has given us pause for thought.
The Government has published its response and action plan following its consultation in March this year on reforming the UK’s corporate governance landscape in the context of insolvent companies.
In its original consultation, the Government put forward various proposals to deal with perceived deficiencies in the management of troubled companies that may be leading to poorer outcomes for creditors, employees and other stakeholders.
In March 2018, the Department for Business, Energy and Industrial Strategy (BEIS) published a consultation on proposed reforms to the UK’s insolvency and corporate governance landscape. That consultation included certain significant proposals, including extending liability to the directors of holding companies that sell insolvent subsidiaries.
The Financial Conduct Authority (FCA) has been conducting a review of the operation of the Financial Services Compensation Scheme (FSCS), seeking views as to how to reduce the number and value of claims falling to the FSCS and assessing how the scheme is funded, including the impact of professional indemnity insurance (PII).
The High Court has found that two directors and one former director of a company were in breach of their duties by causing the company to implement a reorganisation and a capital reduction when they were aware there was a risk it would lose its source of income.
In addition, the statutory statement of solvency supporting the capital reduction was invalid because the director had not formed the opinion set out in it. As a result, the capital reduction and a subsequent dividend were unlawful, and the directors were liable to repay the dividend.
What happened?
A summary of recent developments in insurance, reinsurance and litigation law.
Engelhart CTP v Lloyd's Syndicate 1221: Court holds that all risks cargo policy did not cover fraudulent documents for a non-existent cargo
On occasion, parties engaged in court proceedings will consider procedural tactics with the ultimate intention of exerting such pressure on their adversaries that their weakened position, or even inability to pursue the proceedings, will work to their advantage. Such a situation arose in (1) Deleclass Shipping Co. Ltd (2) MWI Shipping Services Ltd v Ingosstrakh Insurance Co. Ltd (2018) where the defendant's application for security for costs became very problematic for the claimants.
Weighing in at the intersection of bankruptcy law and the doctrine of subrogation, the Ontario Court of Appeal has ruled that insurers are not entitled to commence subrogated claims in the name of bankrupt insureds.
The High Court has held that two director-shareholders of a company who were unsuccessfully prosecuted for fraud could not claim back the drop in the value of their shares when the company’s business failed.
What happened?
The Department for Business, Energy and Industrial Strategy (BEIS) has published a consultation on insolvency and corporate governance.
The consultation is aimed primarily at improving corporate governance in firms that are in or approaching insolvency. However, it also puts forward proposals for improving the wider framework of corporate governance.
The key proposals from the consultation are set out below.