The Superior Court of Quebec rules in favor of Export Development Canada (“EDC”) and enforces a "[unequivocal]" Waiver against the surety who signed it in the context of a loan guarantee granted to the RBC.

Relevant Facts

The Kingdom introduced its first ever bankruptcy law in 2018 which has created a foundation for a business rescue culture in Saudi Arabia. Companies undergoing financial difficulties are equipped with the tools that allow them to either trade out of a difficult period or liquidate the business in a manner which does not leave creditors out of pocket. More recently, to complement the existing insolvency regime, rules of cross-border bankruptcy proceedings came into effect on 16 December 2022 (“Rules”).

In a significant recent judgment, the ADGM Court has clarified that it has jurisdiction to hear an action for fraudulent trading against the former directors of an onshore UAE company.

By way of background, NMC Healthcare LTD (NMC), and its various subsidiaries, were incorporated in onshore UAE. On 17 September 2020, NMC was redomiciled as an ADGM company. Shortly thereafter, on 27 September 2020, NMC was put into administration pursuant to the ADGM Insolvency Regulations 2015 and joint administrators (the Joint Administrators) appointed.

Since the pandemic, during which insolvency rates were low due to Government measures, there has been a considerable rise in insolvencies in the UK and many other jurisdictions. High interest rates have significantly increased the cost of borrowing and many companies are saddled with mountains of debt that was taken out in better times and which are now difficult to repay. In addition, high inflation and energy costs, lower consumer confidence and volatile supply chains have all contributed to making the last few years very difficult for businesses.

The adage ‘there is no such thing as a free lunch’ rings true for the 831 company directors disqualified in 2023/24 for abusing the Covid financial support scheme.

The Dubai Court of First Instance concludes that preventive composition, restructuring, bankruptcy, and liquidation are only possible if the debtor company has existing assets.

In a recent judgment issued on 26 April 2023 the Dubai Court of First Instance rejected the liquidation application of an indebted company on the basis that the company does not have any assets that could be liquidated.

Over the past year or so, we have seen a number of examples of Dubai Courts taking an extremely cautious approach to handling debtor-led bankruptcy cases, particularly in relation to determining whether there is a legitimate distressed financial position and enquiring as to the conduct of managers leading to the bankruptcy of companies.

Different recession, regulatory environment and litigation market leads to different exposures

Whilst there is a clear link between recessionary conditions and claims against financial institutions, financial services professionals and directors and officers, the lessons from the previous recessions in the early 1990s and 2008 onwards may only take us so far in predicting the outcomes this time, given the different economic base going in and the catalysts for this recession (which include the pandemic, the war in Ukraine and high inflation).

In what has been referred to as a “momentous decision for company law”, the Supreme Court recently considered whether, when a company is in the ‘insolvency zone’, its directors must have regard to the interests of its creditors in addition to, or instead of, its shareholders.

In a judgment rendered on 10 October 2021, the Dubai Court of First Instance had concluded that current and former directors and managers of Marka were personally liable towards creditors of the company merely on the basis that the assets of the company were not sufficient to pay at least 20% of its debts. The 20% threshold was set in onshore Federal Decree Law No. (9) of 2016 on Bankruptcy (the Bankruptcy Law) as it then was, and the Court determined that liability applied to current and former directors and managers without distinction where the threshold is not met.