The Supreme Court in Sevilleja v Marex Financial Ltd [2020] UKSC 31 has brought much needed clarity to the legal basis and scope of the so-called ‘reflective loss’ principle. The effect of the decision is a ‘bright line’ rule that bars claims by shareholders for loss in value of their shares arising as a consequence of the company having suffered loss, in respect of which the company has a cause of action against the same wrong-doer.
The COVID-19 pandemic created an unprecedented situation for the lives and livelihoods of people from every socioeconomic background. In response to the pandemic, Cyprus introduced a series of humanitarian and financial measures, with the latter covering insolvency and restructuring matters.
It is a sad reality that the Covid-19 Pandemic is likely to lead to a spike in the number of companies being put into insolvency. This has the potential to leave parties with claims against those companies with a reduced prospect of full recovery, even if their claims are strong. As a result, claimants may look for alternative targets, including ways in which they could sue directors personally.
On 20 July 2020, the Companies (Miscellaneous Provisions) (COVID-19) Bill 2020 (the Bill) was initiated in Seanad Éireann (the upper house of the Irish parliament). This proposed legislation seeks to address certain specific company law issues which have arisen in the context of the ongoing and unprecedented Coronavirus (COVID-19) crisis.
General Meetings
Re Patrick Cowley and Lui Yee Man, Joint and Several Liquidators of the Company [2020] HKCFI 922(date of judgment: 27 May 2020)
Law of Undue Preference in Malaysia – Section 528(1) of the Malaysian Companies Act 2016 provides that:-
UK insolvency landscape permanently changed by the Corporate Insolvency and Governance Act 2020 (“the 2020 Act”).
On 26 June 2020 the Corporate Insolvency and Governance Act 2020 (“the 2020 Act”) finally entered into force. Now it is in its final form, Simon Newman and Christopher Pask of 1 Chancery Lane’s Commercial, Chancery and Property team will be providing their views on its provisions and their impact over a series of updates.
The Office of the Director of Corporate Enforcement (ODCE) recently issued new guidance outlining the implications of COVID-19 on its insolvency related functions. The statement provides an update on how they will assess the actions of directors of companies which have gone or will go into an insolvent liquidation as a consequence of the pandemic. The guidance is undoubtedly a welcome publication during this difficult time for almost all businesses.
Background
O QUE É CHAPTER 11?
A key principle of English law is that double recovery of losses should be avoided. In company law a related concept has emerged, known as the principle of reflective loss. This prevents a shareholder in a company from suing a wrongdoer for the reduction in the value of shares or distributions when the loss suffered is a ‘reflection’ of a loss sustained by the company. The intention is to ensure equality between shareholders as a whole and to underline that each shareholder’s investment follows the fortunes of the company.