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    Lehman derivatives transaction did not run afoul of fraudulent conveyance rules, says UKSC
    2011-09-29

    In 2002 a European subsidiary of Lehman Brothers created a complicated synthetic debt structure called Dante, which was intended to provide credit insurance for another subsidiary, LBSF, against credit events affecting certain reference entities, the obligations of which formed the reference portfolio. A special purpose vehicle issued notes to investors, the proceeds of which were used to purchase collateral which vested in a trust. The issuer entered into a swap with LBSF under which LBSF received the income on the collateral and paid the issuer the amount of interest due to noteholders.

    Filed under:
    United Kingdom, Banking, Derivatives, Insolvency & Restructuring, Litigation, Borden Ladner Gervais LLP, Collateral (finance), Interest, Swap (finance), Debt, Good faith, Common law, Default (finance), Subsidiary, Payment protection insurance, Lehman Brothers, Trustee, UK Supreme Court
    Location:
    United Kingdom
    Firm:
    Borden Ladner Gervais LLP
    anti-deprivation: a question of substance not form
    2011-07-29

    In the much anticipated decision of Belmont Park Investments PTY Limited v BNY Corporate Trustee Services Limited and Lehman Brothers Special Financing Inc [2011] UKSC 38 the Supreme Court has unanimously dismissed the appeal of Lehman Brothers Special Financing Inc (“LBSF”) and in so doing provided clarification as to the scope and application of the anti-deprivation rule (the “Rule”).

    Filed under:
    United Kingdom, Insolvency & Restructuring, Litigation, Mayer Brown, Collateral (finance), Interest, Swap (finance), Consideration, International Swaps and Derivatives Association, Lehman Brothers, Court of Appeal of England & Wales, UK Supreme Court
    Authors:
    Devi Shah , Ashley Katz , Kristy Zander , Alexandra Wood , Jennifer Fox
    Location:
    United Kingdom
    Firm:
    Mayer Brown
    Security from principal debtor does not preclude claim against guarantor
    2011-07-20

    The case of White v Davenham Trust Ltd, has reaffirmed that a creditor can choose its own method of enforcing a debt which has been guaranteed even where it might hold security for that debt.

    Filed under:
    United Kingdom, Banking, Insolvency & Restructuring, Litigation, Gowling WLG, Bankruptcy, Surety, Debtor, Interest, Debt, Liability (financial accounting)
    Authors:
    Greg Standing , Ian Weatherall
    Location:
    United Kingdom
    Firm:
    Gowling WLG
    Smoke in the hall of mirrors: good news for defendants in Sinclair v Versailles [2011] EWHC Civ 347
    2011-06-08

    The Sinclair v Versailles1 decision has extinguished any prospect that a victim of a fraud has a proprietary claim to a fraudster’s secret profits. It also offers significant comfort to banks, insolvency practitioners and other potential recipients of trust funds by setting a high bar for whether a recipient person is “on notice” of a proprietary claim to those funds.

    Filed under:
    United Kingdom, Banking, Insolvency & Restructuring, Litigation, White Collar Crime, Herbert Smith Freehills LLP, Share (finance), Bribery, Fraud, Fiduciary, Interest, Beneficiary, Consideration, Public limited company, Trustee, High Court of Justice (England & Wales)
    Location:
    United Kingdom
    Firm:
    Herbert Smith Freehills LLP
    Echelon Part 1 - no right of retention for former liquidators
    2011-06-09

    In a recent case in relation to the liquidation of Echelon Wealth Management Limited ("E"), Lord Glennie has decided that upon removal as liquidator, a former liquidator may not retain from the assets of the liquidated company any sum as security for costs.

    The Facts

    S&C were appointed joint liquidators of E at a creditors meeting on 16 December 2008. At a creditors meeting on 22 July 2009, they were then removed from office with new joint liquidators being appointed.

    Filed under:
    United Kingdom, Insolvency & Restructuring, Litigation, MacRoberts LLP, Costs in English law, Unsecured debt, Security (finance), Interest, Liquidation, Liquidator (law)
    Authors:
    Alan Meek , Leon Breakey
    Location:
    United Kingdom
    Firm:
    MacRoberts LLP
    Echelon 2 - guidance on reduction of liquidators remuneration
    2011-06-15

    As reported in our recent e-update on the case of Echelon Wealth Management Limited (in liquidation), Lord Glennie has determined that liquidators who are removed from office have no right to retain assets as security for remuneration and costs.  Lord Glennie then went on to consider how the court, in determining the level of a liquidator’s remuneration, should view the conduct of the liquidator. 

    Filed under:
    United Kingdom, Insolvency & Restructuring, Litigation, MacRoberts LLP, Costs in English law, Breach of contract, Interest, Withholding tax, Liquidation, Liquidator (law)
    Authors:
    Alan Meek , Leon Breakey
    Location:
    United Kingdom
    Firm:
    MacRoberts LLP
    The 'balance sheet' test of corporate insolvency
    2011-04-05

    In the recent case of BNY Corporate v Eurosail[1], the Court of Appeal for the first time considered how the 'balance sheet' test of corporate insolvency in section 123(2) Insolvency Act 1986 (IA 1986) should be applied.

    Section 123(2) IA 1986 provides:-

    'A company is also deemed unable to pay its debts if it is proved to the satisfaction of the court that the value of the company's assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.'

    Filed under:
    United Kingdom, Insolvency & Restructuring, Litigation, Wedlake Bell, Interest, Debt, Liability (financial accounting), Legal burden of proof, Liquidation, Balance sheet, Insolvency Act 1986 (UK), Court of Appeal of England & Wales
    Authors:
    Richard Hewitt
    Location:
    United Kingdom
    Firm:
    Wedlake Bell
    The point of no return - a balancing act
    2011-04-08

    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.

    Filed under:
    United Kingdom, Corporate Finance/M&A, Insolvency & Restructuring, Litigation, Mayer Brown, Foreign exchange market, Interest, Swap (finance), Debt, Liability (financial accounting), Legal burden of proof, Liquidation, Balance sheet, Cashflow, Default (finance), Mortgage-backed security, Lehman Brothers, Insolvency Act 1986 (UK), Court of Appeal of England & Wales
    Authors:
    Sally Mui
    Location:
    United Kingdom
    Firm:
    Mayer Brown
    Navigating through the storm
    2011-03-30

    There remains much economic uncertainty ahead and it seems that insolvency practices are likely to continue to remain important drivers in accountancy firms. However, insolvency practitioners are facing increased regulation and public scrutiny. They need to remain on top of their game to navigate safely through stormy waters, as Ross Goodrich reports.

    Background

    Filed under:
    United Kingdom, Insolvency & Restructuring, RPC, Shareholder, Unsecured debt, Interest, Accounting, Economy, Liquidation, Liquidator (law), Law Society of England and Wales, Office of Fair Trading, Institute of Chartered Accountants in England and Wales
    Location:
    United Kingdom
    Firm:
    RPC
    Administrator challenges Tayplan pay plan
    2011-03-22

    The recent Court of Session case of Tayplan Limited (in administration) v Smith, is particularly interesting as it is a case where the administrator chose to pursue directors for breach of fiduciary duties rather than using any of the more common statutory remedies.

    The Facts

    Tayplan Limited was a family business with two directors - Mr Smith senior and Mr Smith junior. Mr Smith senior and his wife each held 50% of the shares in the Company.

    Filed under:
    United Kingdom, Scotland, Insolvency & Restructuring, Litigation, MacRoberts LLP, Share (finance), Shareholder, Breach of contract, Fiduciary, Board of directors, Interest, Consideration, Court of Session
    Authors:
    Alan Meek , Leon Breakey
    Location:
    United Kingdom
    Firm:
    MacRoberts LLP

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