One of the recent hot topics in the European restructuring market has been whether the UK Courts would sanction a scheme of arrangement in relation to a foreign company, with no previous connection to the UK whatsoever, where the sole basis for establishing jurisdiction to undertake the scheme would be amending the governing law and jurisdiction clauses of the company’s principal finance documents to English law.
Key point
When assessing if a company is insolvent on the "cash-flow" basis, the Court will consider not only whether a company manages to meet its debts as they fall due but also how a company does so. A company meeting its debts simply by increasing longer-term debt, will likely be held to be insolvent.
The facts
The PPF Ombudsman has rejected an appeal by a pension scheme member which was based on the premise that the PPF compensation cap contravened European law (in this case the Insolvency Directive). The Insolvency Directive requires member states to take "necessary measures" to ensure protection of members' occupational retirement benefits upon the insolvency of an employer.
In recent years some high profile (and controversial) court decisions have swelled the list of liabilities that must be paid as expenses of an administration. Administration expenses enjoy "super priority", being payable out of floating charge realisations ahead of the claims of preferential creditors and floating charge holders. So, when an otherwise unsecured claim ranks as an administration expense, it clearly benefits the relevant creditor, but at the expense of the floating charge holder.
In Bailey & Others (Joint Liquidators of D&D Wines International Limited) v Angove’s Pty Limited1, the Court of Appeal overturned a decision of the High Court, and so permitted the liquidator of an insolvent agent to recover funds due to it from end-customers despite the agency having been terminated.
Background
In Re Lehman Brothers International (Europe) (in administration) and others [2014] EWHC 704 (Ch), the High Court ruled on issues regarding the order of distributions and payments in the administration and potential liquidation of various Lehman entities. This wide-ranging judgment gives clarity on a number of previously uncertain issues.
On 24 February 2014 the Court of Appeal delivered its long awaited judgment in the GAME Group litigation (Pillar Denton Limited & Ors -v- Jervis & Ors).
This is an extremely important decision and will affect every trading administration where the company is a tenant.
The recent Court of Appeal decision in Rawlinson and Hunter Trustees SA & others v Akers & another [2014] serves to emphasise that third party reports commissioned by liquidators to enable them to consider whether litigation should be commenced in order to make recoveries for the benefit of creditors will not always attract litigation privilege.
In its decision on the Game Station1 appeal, the Court of Appeal has overturned the cases of Goldacre2 and Luminar3 holding that office holders of insolvent companies must pay rent of property occupied for the benefit of creditors on a “pay as you go” basis irrespective of when rent falls due under the lease.
The facts