English High Court places US company into Administration

On 7 October 2016 Ashfords' Restructuring and Insolvency Team, led by partner Alan Bennett, assisted the directors in securing an Administration order in respect of Ronin Development Corporation (the "Company").

The Company was incorporated in Princeton, New Jersey, in October 1986 under the New Jersey Business Corporation Act, and is a global marketing, consulting and research company.

The Court held that it had jurisdiction to order a Latvian bank to disclose information regarding a bankrupt's dealings. The Joint Trustees of the Bankrupt's estate had demonstrated that their request was reasonable and was required to identify further assets that the Bankrupt might hold.

This decision is the latest that has been made in relation to the bankruptcy of Mr Shlosberg, a Russian businessman domiciled in London. Mr Shlosberg was made bankrupt in January 2015 on a judgment debt of US$195 million plus interest.

This article was first published in The Gazette and the full article can be found online here.

As there is no clear definition in s.335A(3) of the Insolvency Act 1986 of what amounts to ‘exceptional circumstances’, the courts must apply the judgments of case law when determining whether to delay an order for possession and sale.

The Facts

Mr Brown was declared bankrupt on 12 May 2016, following possession proceedings and costs order against him which had not been paid. Mr Brown did not accept that the original litigation leading to his bankruptcy was valid, and as a result did not accept that the bankruptcy proceedings were valid either. Mr Brown represented himself at all hearings and refused legal representation or assistance.

The English Court refused an application by Liquidators to stay English proceedings pending the outcome of similar proceedings in the US.

The Joint Liquidators of a Luxembourg company ("the Company") applied to stay English proceedings that they had brought against private equity investors ("the Defendants") until similar proceedings in the US had been resolved, or for three months to enable the Liquidators to raise finance for the litigation.

Directors against whom claims for a misfeasance have been intimated often turn to limitation and set off in defence of a request for the repayment or restoration of the relevant sums or property.

Misfeasance and limitation

Section 236 Insolvency Act ("IA") 1986 enables the Court power to summon persons with information about the affairs of a company to appear before it and / or to produce documents. In our August bulletin we considered the decision of the English High Court in Re MF Global [2015] EWHC 2319 when it was held that s236 does not have extra-territorial effect. However, having looked at the issue again in Official Receiver v Norriss [2015] EWHC 2697, the High Court has departed from the position in Re MF Global.

The High Court considered whether it would be appropriate to approve a scheme of arrangement for a company incorporated in Luxembourg where the company's COMI had been moved to England and there had been a change in the governing law and jurisdiction clause in favour of the English courts.

The English High Court has for the first time directly addressed the question of the extra-territorial application of s233 of the Insolvency Act 1986. The Official Receiver as Liquidator of Sahaviriya Streel Industries UK Ltd sought an order to restore access to an IT system provided to the Company by its parent company in Thailand. In granting permission to the Official Receiver to serve the application out of the jurisdiction, the Court was persuaded by the reasoning in the recent cases of Jetivia and Re Paramount Airways which concerned other provisions of the Insolvency Act 1986.

The Facts

Norton Aluminium Ltd (NAL) went into Administration following a partially successful nuisance claim against it and subsequently went into Liquidation. Mr Dickinson was the managing director and controlling shareholder and brought a claim to recover a secured loan made by him to NAL. The Liquidators counterclaimed to set aside or recover compensation for various transactions, including a share buyback from Mr Dickinson and connected parties by NAL for £2.5 million and the sale of a subsidiary to Mr Dickinson for £1.