In the January 2018 edition of our dispute resolution and insolvency bulletin, we review eight cases from the BVI Commercial Court and BVI Court of Appeal from the past year. As most readers will be aware, the main non-legal news last year was that in September 2017, the British Virgin Islands were hit by category five hurricanes Irma and Maria which caused considerable devastation. The BVI Commercial Court temporarily relocated to St Lucia and impressively got back on its feet quickly in order to support the international financial services business of the BVI.
Introduction
On 4 September 2017, Her Honour Hazel Marshall Q.C., Lieutenant Bailiff, handed down judgment in the case of Carlyle Capital Corporation Limited (in Liquidation) and others v. Conway and others [2017] Civil Action No. 1510, one of the most anticipated judgments in recent Guernsey jurisprudence, and the first time that a Guernsey court has memorialised certain fundamental legal principles affecting directors and the companies they serve.
In Global Corporate Limited v Dirk Stefan Hale [2017] EWHC 2277 (Ch), the Applicant, the assignee of the claim in question, failed in its application seeking relief against the former director and shareholder of a company in liquidation, Mr Hale (DSH). The decision is a salutary lesson in the importance of a properly drafted Deed of Assignment, the need to properly consider the commercial benefits of such an assignment and the risks of pursuing an unlawful dividend claim.
Pursuant to the Insolvency Act 1986 a company's liquidator can recover any of the company's property that is transferred after the date on which a winding up petition is issued. This is because s.127 makes any disposition of property (such as land, money and goods) in the period after issue of a winding up petition void.
As Insurers underwriting risks in Spain are aware, the recent financial crisis resulted in a significant increase in claims against directors by trustees appointed when a company enters into an insolvency process. Insolvency proceedings in Spain reach a determination as to the culpability of directors implicated in the company's demise. In this context, the Spanish courts will look at whether the directors were "guilty" or whether the insolvency was "fortuitous". However, not all determinations will express whether the director's conduct was in bad faith or wilful.
The Insolvency Rules 2016 came into force on 6 April 2017 and seek to modernise the insolvency process. These changes were, in part, brought about by the changes to insolvency law and practice as a result of the Small Business, Enterprise and Employment Act 2015 ("the Act"). Now is therefore a good time to take stock of the other key changes brought about by the Act that were anticipated to impact on D&O claims.
In March 2017, the States of Guernsey approved the reform of Guernsey’s insolvency laws, which afford greater protection to creditors and investors. The necessary legislative amendments are currently being drafted although the date of issue is yet to be determined.
Key changes proposed include:
In this case, the firm was instructed by the English liquidators of Arck LLP (in liquidation) to assist in the recovery of assets misappropriated from a large number of British investors and channelled through Jersey corporate and trust structures as part of a fraudulent collective investment scheme.
The Insolvency Rules 2016 ("IR 2016") are due to come into force in England and Wales on 6 April 2017. Its purpose is to modernise and streamline the insolvency process in England and Wales in order to reduce the costs and potentially increase returns to creditors. IR 2016 incorporates the changes to insolvency law and practice brought about by the Deregulation Act 2015 and the Small Business, Enterprise and Employment Act 2015.
This article highlights the principal areas of change and their practical implications.
Background
The British Virgin Islands ("BVI") is a long-standing jurisdiction of choice for incorporating joint venture and private equity vehicles. In more recent years it has also become an established option for investment funds. This is due to its business-friendly and flexible main corporate statute, the BVI Business Companies Act (the "Act"), as well as the BVI’s modern regulatory and judicial regime.
Plans and Schemes of Arrangement in the British Virgin Islands