When Hanjin Shipping went into administration in late 2016, reportedly over 500,000 containers were stranded or arrested at ports worldwide, including many in the Middle East. Cargo owners who find themselves in such circumstances can be critically affected (particularly if the cargo is temperature sensitive, perishable or urgently required), and they will often look to their cargo insurers. This note highlights a number of issues which are likely to arise when a carrier becomes insolvent during a laden voyage, and claims are made under a marine cargo policy in the UAE.
ADVISORY | DISPUTES | TRANSACTIONS Make insolvency great again February 2017 One of the great criticisms of the new President of the United States of America is that his companies filed for bankruptcy four times when he was a business mogul. In truth Donald Trump utilised various provisions of Chapter 11 of the US Bankruptcy Code to restructure his businesses. In an effort to encourage a similar level of entrepreneurial spirit, a mere 14 days after his election the EU Commission unveiled plans to adopt a pan-European regime which closely mirrors much of the US’s Chapter 11.
On 11 October 2016, the High Court10 held that statutory interest payable on an insolvency (under rule 2.88(7) IR 1986) is not “yearly interest” for UK tax purposes. Such statutory interest is therefore not subject to UK withholding tax (20%).
The facts of the case are somewhat unusual in that there was a substantial surplus in the administration and the statutory interest was estimated at £5bn. However the decision is a welcome clarification of the position. It also confirms HMRC’s previous guidance on the taxation of statutory interest (subsequently withdrawn).
On 29 November 2016, the First-tier Tribunal9 held that the issue of growth shares to certain key employees had inadvertently caused an existing class of ordinary shares to carry a preferential right to assets on a winding up. The effect of this was that both prior ordinary share issues, and future share issues, failed to meet the requirement of the Enterprise Investment Scheme (EIS) rules.
In our previous two briefings on the Bankruptcy Law, we have looked at a summary of the key changes made by the Law, and the potential personal liability faced by directors of UAE companies in financial difficulty. In this briefing, we turn to creditor protection.
It has been just over two months since one of South Korea's largest shipowners and operators, Hanjin Shipping Co Ltd (“Hanjin”), applied for court rehabilitation. On 1 September 2016, the Bankruptcy Division 6 of the Seoul Central District Court (the “court”) issued a decision accepting that application and commencing rehabilitation proceedings.
Privy Council considers entitlement to costs of preparing to comply with a third party disclosure order
In Lehman Brothers International (Europe) (in Administration) v Exxonmobil Financial Services BV(1) the High Court considered a range of issues arising from the application of the close-out provisions of the standard-form Global Master Repurchase Agreement (GMRA) 2000.
In Lomas and others v HMRC [2016] EWHC 2492 (Ch), the High Court has confirmed that statutory interest payable on insolvency is not 'yearly interest' for UK tax purposes. The administrators therefore had no obligation to account for income tax on the interest payments made. The Court was also critical of HMRC's contradictory guidance on this issue.
Background
The UAE government has issued Federal Decree Law No. 9 of 2016 on Bankruptcy (the New Law). The New Law was published in the Official Gazette with a publication date of 29 September 2016 and will come into force three months later on 29 December 2016.
Key Points