The Court of Appeal has given guidance on when the duty of directors to have regard to the interest of creditors arises. This is an important point, as the general statutory duty of a director to promote the success of the company for the benefit of the company's members is expressly subject to the rules on creditors' interests. The court's decision also considers whether a dividend payment can be challenged as a transaction at an undervalue under section 423 of the Insolvency Act 1986.

Facts

The U.K. Supreme Court has handed down its judgment in the joined cases of Rubin and another v Eurofinance SA and others and New Cap Reinsurance Corporation (in liquidation) and another v A E Grant and others [2012] UKSC 46. (24 October 2012)

Key points:

Earlier last month, the UK High Court held that administrators appointed under the Investment Bank Special Administration Regulations 2011 (UK) are not officers analogous to liquidators.

The ruling arose from an application for directions made by investment bank administrators (IBAs) on the issue of whether their appointment was analogous to the appointment of a liquidator. Had the Court held in the affirmative, their appointment would have constituted an event of default by the company in administration under the terms of a global master repurchase agreement.

In the recent English decision of Neumans LLP v Andronikou & Others, a company had unsuccessfully opposed a winding up petition and the question for the Court was whether the solicitors' costs in doing so were an expense of the administration. In considering this issue, the Court noted that there would have to be "some special reason, connected with the administration" to make the administrators pay fees in full as an expense when statutory provisions did not allow for solicitors to have priority over other creditors and those entitled to claim expenses.

The High Court of England and Wales has recently grappled with a lacuna in United Kingdom bankruptcy law, namely how the expenses of a trustee in bankruptcy should be dealt with where the bankruptcy order from which he derives his title is successfully overturned on an appeal of which he was not notified? The Court ultimately found that it was within its inherent jurisdiction to hold the bankrupt liable to pay the trustee's reasonable expenses. However the case highlights the gap in the United Kingdom's bankruptcy laws in failing to provide adequate guidelines in this scenario.

Re MK Airlines (16 May 2012) (unreported)

Further to our October 2011 update, the UK Supreme Court has released its decision in respect of the New Cap Reinsurance and Rubin appeals.

In Ollerenshaw and Reeh v the Financial Services Authority (the FSA), former directors of the Black and White Group Limited (in liquidation) (B&W), challenged decisions of the FSA in a reference to the Upper Tribunal.

For more than a century, courts in England and Wales have refused to recognize or enforce foreign court judgments or proceedings that discharge or compromise debts governed by English law. In accordance with a rule (the "Gibbs Rule") stated in an 1890 decision by the English Court of Appeal, creditors holding debt governed by English law may still sue to recover the full amount of their debts in England even if such debts have been discharged or modified in connection with a non-U.K.

In the recent UK case of Wright and others v HMV Ecommerce Limited and another [2019] EWCH 903, the Court considered whether an electronic filing (e-filing) of a notice of appointment of administrators by directors outside the court’s opening hours was valid.

Background