The Supreme Court recently considered the scope of the anti-deprivation principle, in Belmont Park Investments PTY Limited (respondent) v. BNY Corporate Trustee Services Limited and Lehman Brothers Special Financing Inc (appellant) [2011] UKSC 38 (Belmont). Understanding the scope of this principle is important for anyone entering a contract where the parties’ rights and obligations change if one of them enters an insolvency procedure. Robert Spedding explains how the courts applied the principle in Belmont and makes some practical suggestions for avoiding problems.

In Fielding v The Burnden Group Limited (BGL) the English High Court dismissed an application for the liquidator to be held personally liable for the costs of a successful appeal against the rejection of a proof of debt.

In Finnerty v Clark the appellants were the sole shareholders and substantial unsecured creditors of St George's Property Services (London) Ltd (St George).  The respondents were administrators of St George.  The High Court decision was reviewed in our December 2010 insolvency legal update.

The case of Taylor and Ors v B concerned a company that imported and distributed hair care products, Cabellos Holdings Limited.

The High Court has sanctioned a scheme of arrangement between a Vietnamese company and certain of its creditors; the first time a Vietnamese company has taken advantage of this restructuring process in England.

Background

The Government is proposing to amend (for a twelfth time!) the Regulations under s75 Pensions Act 1995. The amendments would make it easier to vary the basis on which liability is shared between employers.

Background – the Regulations as they stand

Introduction

In BNY Corporate Trustee Services Ltd v Eurosail UK 2007 - 3BL PLC & Ors, the English Court of Appeal has decided that the mere fact that a company’s aggregate liabilities exceed its assets may not render the company to be deemed unable to pay its debts under section 123(2) of the UK Insolvency Act 1986 (commonly referred to as the “balance sheet test”). The test is whether a company has reached a point of no return such that its state of affairs is not or is unlikely to continue having regard to its contingent and future liabilities.

BNY Corporate Trustee Services Limited v Eurosail-UK 2007-3BL Plc & others [2011] EWCA Civ 227

The Court of Appeal has allowed companies around the country to breathe a solvent sigh of relief, as it has held that the so-called “balance sheet” test of insolvency in s123(2) Insolvency Act 1996 is intended to apply where a company has reached a “point of no return” rather than being used as a “mechanistic, even artificial, reason for permitting a creditor to present a petition to wind up a company”.  

The signs for the leveraged finance market in 2011 are mixed. Questions remain as to whether this year will see a fresh spate of restructurings and/or continued growth in primary issuance. Whilst data compiled by Fitch Ratings has shown that European PE backed company default rates slowed in 2010 (and premier league spending during the January transfer window topped £225 million compared with £30 million last year), the primary leveraged finance market has started slowly this year.