The Court of Appeal has recently overturned the commonly held belief that a validation order would normally be made if the disposition made by a company subject to a winding up petition was done so in good faith and in the ordinary course of business at a time when the parties were unaware of the existence of the petition.

1. The starting point

Section 127 Insolvency Act 1986 provides:

Last years decision of the High Court in Kean v Lucas (Re J&R Builders (Norwich) Ltd) [2016] EWHC 2684 (Ch)puts into further context a number of cases concerning the rights of creditors to requisition a meeting to replace a creditors’ voluntary liquidator (or by analogy officeholders generally). But does it provide any answers?

References below to ‘Sections’ or ‘Rules’ are references to the Insolvency Act 1986 and Insolvency Rules 1986 respectively.

The Law at a Glance

ADVISORY | DISPUTES | TRANSACTIONS “Gagging orders”: an office holder’s secret weapon December 2016 Introduction Practitioners are fully aware of the extensive powers available under ss 235 and 236 of the Insolvency Act 1986 (IA 1986) allowing administrators and liquidators as office holders (OHs) to require individuals and organisations to disgorge information.

A significant decision issued last week by a five judge bench of the Inner House has reversed a 40 year old decision on the meaning of 'effectually executed diligence' in a receivership.

Section 60 of the Insolvency Act 1986 provides that in a receivership, all persons who have 'effectually executed diligence' on any part of the property of the company which is subject to the charge by which the receiver is appointed have priority over the holder of the floating charge.

(1) SIMON ROBERT THOMAS (2) ARRON KENDALL v (1) FROGMORE REAL ESTATE PARTNERS GP1 LTD (2) LINDA NICHOL (3) CHARLES SPARY (4) STUART JENKIN (5) NATIONWIDE BUILDING SOCIETY : (1) FROGMORE REAL ESTATE PARTNERS GP1 LTD (2) LINDA NICOL (3) CHARLES SPARY (4) STUART JENKIN v (1) SIMON ROBERT THOMAS (2) ARRON KENDALL (3) NATIONWIDE BUILDING SOCIETY sub noms (1) IN THE MATTER OF FREP (KNOWLE) LTD (IN ADMINISTRATION) (2) IN THE MATTER OF FREP (ELLESMERE PORT) LTD (IN ADMINISTRATION) (3) IN THE MATTER OF FREP (BELLE VALE) LTD (IN ADMINISTRATION) [2017] EWHC 25 (Ch)

The modernisation of the Scottish Insolvency Rules has been eagerly awaited for some time. In April 2017, England & Wales will see the newly transformed insolvency legislation take full effect with the introduction of the Insolvency (England and Wales) Rules 2016. These new rules do not, however, impact on Scotland.

Summary

The UK Court of Appeal recently confirmed that lawyers (Decherts) could no longer act for a company (Avonwick). Our views on the first instance decision can be found here.

Background

Kazakhstan Kagazy Plc v Zhunus [2016] EWCA Civ 1036 – Court of Appeal

A group of companies brought proceedings against their former chairman (“Mr Zhunus”), CEO (Mr Arip”) and former director (“Mr Dikhanbayeva”) for misappropriation of their assets.

In Akers (and others) v. Samba Financial Group [2017] UKSC 6, the UK Supreme Court has confirmed the limited nature of British insolvency officer-holders’ ability to void dispositions of a company’s assets held on trust. The Supreme Court also highlighted the potential dangers inherent in holding on trust assets located in jurisdictions which do not recognise common law trusts.

HENRY GEORGE DICKINSON (Claimant) v (1) NAL REALISATIONS (STAFFORDSHIRE) LTD (2) KEVIN JOHN HELLARD & GERALD KRASNER (JOINT LIQUIDATORS OF THE FIRST DEFENDANT) (Defendants) & JUDITH YAP DICKINSON (Third Party) & ROBERT WILLIAMSON (Fourth Party) [2017] EWHC 28 (Ch)

Norton Aluminium Limited ("the Company") went into administration in August 2012 when it received a draft judgment in favour of local residents in a claim for nuisance, which resulted in substantial damages being award and likely legal costs.