Key Points
- A trust can be created and enforceable in respect of assets sited in a jurisdiction that does not recognise the concept of a trust
- In circumstances where the owner of a beneficial right goes into liquidation, the transfer of legal rights held by a third party to a bonafide purchaser for value is not a disposition within the meaning of s127.
The Facts
English schemes of arrangement under the Companies Act 2006 (Schemes) have been increasingly used by non-English companies as a powerful tool to restructure their financial indebtedness. Recent prominent examples of German companies that have utilized Schemes to cramdown non-consenting or “holdout” creditors in order to restructure the company’s balance sheet include TeleColumbus, Rodenstock and Primacom.
There are several reasons for this trend:
Key points
- Automatic stays on proceedings are imposed by Article 20 of the UNCITRAL Model Law (and mirrored in s.130(2) IA 1986)
- The case reinforces the principle that automatic stays are designed to avoid the unnecessary expenditure of assets otherwise available for distribution amongst creditors
The facts
Background
Administration
Administration is a procedure by which a company can be reorganised and its assets realised whilst being protected by a moratorium from actions brought by creditors (explained below).
Objectives
A company can be put into administration if the objectives of administration are likely to be achieved. These are set out in the Insolvency Act 1986 (the “Act”)4 as:
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The recognition of the powers of an English trustee in bankruptcy in Guernsey is generally pursued either by way of a letter of request issued by the foreign court pursuant to section 426 of the Insolvency Act 1986 (Insolvency Act) or by way of an application via the common or customary law.
Advocates Mathew Newman and Sam Dingle acted for the Joint Administrators of a Guernsey company (Company), which was a party to ongoing court proceedings in England.
The Joint Administrators applied to the Royal Court of Guernsey seeking an order that it issue a Letter of Request to the High Court of Justice of England and Wales, requesting the High Court to act in aid of and auxiliary to the Royal Court pursuant to section 426 of the Insolvency Act 1986 (1986 Act) in recognising the appointment of the Joint Administrators as administrators of the Company.
In a recent case1 the High Court held that the purported out of court appointment of administrators over a Guernsey registered limited partnership was void because the appointor used the incorrect form when giving notice of its intention to appoint.
Background
Introduction
Introduction