The English court of appeal has held that a company should not be held to be balance sheet insolvent on the sole basis that its liabilities (including contingent and prospective liabilities) exceed its assets.
In BNY Corporate Trustee Services v Eurosail & Ors, the Court of Appeal considered in detail, for the first time, the construction of section 123 of the UK Insolvency Act 1986, which sets out circumstances in which a company can be deemed to be unable to pay its debts.
The relevant portions of section 123 provide as follows:
In a recent trilogy of decisions concerning the high-profile insolvency of Jersey company Orb arl and its sole shareholder Gail Cochrane, the Royal Court of Jersey provided a clear endorsement of the capability of the Jersey insolvency regime to deal with complex cross-border insolvency matters. This update considers some of the salient points from the saga so far.
The three Royal Court decisions are as follows:
Ivey v Crockfords (2017 UKSC 67)
Whilst this is not a trust related case, it is an important one which may have an impact on the trust industry going forward as it sees the Supreme Court fundamentally change the test for dishonesty in English law.
As a jurisdiction, Jersey is at the heart of cross-border insolvency and restructuring. Inevitably, situations arise where insolvent companies' assets or possibly important evidence are located overseas or an overseas liquidation regime would be best for creditors. Conversely there will be situations where a foreign insolvency process will require steps to be taken in Jersey.
The high profile insolvency of Jersey company Orb a.r.l (Orb) and its sole shareholder Dr Gail Cochrane (Dr Cochrane), a local GP, has firmly placed Jersey's insolvency regime in the spotlight. The matter commenced in late 2016 and has continued to build throughout the course of 2017 and 2018, with related proceedings in the BVI and before the High Court in England and interested parties ranging from the Serious Fraud Office to law firms.
A Jersey company or one of its creditors may wish the company to be placed into administration in England under Schedule B1 of the UK's Insolvency Act 1986 (the "Act").
An application had been made by the Bank of Scotland Plc and the governor and company of the Bank of Ireland for a letter of request to be sent by the Royal Court of Jersey to the High Court of England and Wales in respect of four Jersey companies that were ultimate beneficial owners of English real estate.
It has been common practice in recent years for the English Courts to make administration orders in respect of Jersey companies with English situs assets, based upon letters of request from the Royal Court of Jersey issued pursuant to section 426 of the UK Insolvency Act 1986. However, a recent case in the English High Court has challenged the basis upon which these administration orders have historically been made.
Background
A Jersey company or one of its creditors may wish the company to be placed into administration in England under Schedule B1 of the UK's Insolvency Act 1986 (the "Act").
In the matter of the representation of Anglo Irish Asset Finance [2010] JRC087
This is the latest decision of the Royal Court in relation to an application by a UK creditor (a bank) for a letter of request to be issued to the English High Court requesting that an administration order be made in respect of a Jersey company.