The High Court has recently held that the appointment of administrators by a sole director of a company with unamended Model Articles was valid.
Background
The document allegedly appointing the administrators of the company was a standard set of board minutes, reportedly chaired by a man and recording that a quorum was present. In fact, there was no meeting, and the decision was taken alone by the sole female director.
The Supreme Court has unanimously dismissed the appeal of the decision in BTI –v- Sequana.
At a time when many companies are facing financial difficulties and directors are considering their legal duties, this long-awaited judgment has confirmed that directors have a 'creditor interest duty' when a company is insolvent or bordering on insolvency or an insolvent liquidation or administration is probable.
Background
In brief
The UK Supreme Court has handed down its long-awaited judgment in relation to the case of BTI 2014 LLC (Appellant) v. Sequana SA and others (Respondents) [2022] UKSC 25, concerning the duty of directors of a company registered under the Companies Act 2006 to consider (and act in accordance with) the interests of the company's creditors.
Contents
In brief
The UK Supreme Court has handed down its long-awaited judgment in relation to the case of BTI 2014 LLC (Appellant) v. Sequana SA and others (Respondents) [2022] UKSC 25, concerning the duty of directors of a company registered under the Companies Act 2006 to consider (and act in accordance with) the interests of the company's creditors.
Contents
In the context of a trade finance dispute, the High Court has considered the contractual interpretation of an irrevocable letter of credit incorporating the commonly used code in the Uniform Customs and Practice for Documentary Credits 600 (UCP 600), published by the International Chamber of Commerce (ICC). In particular, the court held that the issuer’s interpretation of the letter of credit would, in practice, render the instrument revocable, which was inconsistent with the UCP and therefore not the proper construction.
The UK Supreme Court handed down its decision in BTI v Sequana on 5 October 2022, unanimously dismissing the appeal from the 2019 Court of Appeal decision and confirming how directors duties ought to be applied when a company is in the zone of insolvency. Although decisions of the UK Supreme Court are not binding upon the jurisdictions in which Ogier practises law, it will nevertheless be highly persuasive and influence the approach taken in the offshore jurisdictions that Ogier advises upon.
Some 13 years ago, Lehman Brothers' sudden and unexpected insolvency sent ripples across the banking and financial services market, some of which are still felt today.
The Court of Appeal's decision in the consolidated cases of Lehman Brothers Holdings Scottish LP 3 v Lehman Brothers Holdings plc (in administration) and others1 [2021] EWCA Civ 1523 was the latest in a long line of cases seeking to unwind the issues arising from Lehman Brothers' unexpected collapse.
The background
In Stephen John Hunt (Liquidator of Marylebone Warwick Balfour Management Ltd) v Richard Balfour-Lynn and others [2022] EWHC 784 (Ch), the High Court decided that the directors of a company which went into liquidation after participating in an ineffective tax avoidance scheme did not breach their fiduciary duties and payments made pursuant to the scheme were not transactions defrauding creditors.
Background
Background to the Restructuring Plan
The UK has introduced the Restructuring Plan; a new, flexible court supervised restructuring tool. The Restructuring Plan draws upon features of the existing Companies Act 2006 scheme of arrangement procedure (which remains available) but includes features which are new to the UK but similar to those under U.S. Chapter 11 bankruptcy proceedings.
As expected, the UK's latest quarterly company insolvency statistics, published on 28 October, follow the pattern of previous quarterly updates this year with the number of insolvencies continuing to rise in comparison with both the equivalent quarter in 2021, and pre-pandemic.
With the temporary insolvency measures implemented under the Corporate Insolvency and Governance Act no longer in force, the Q3 2022 data shows a significant increase in insolvencies from Q3 2021, with the overall number of registered company insolvencies 40 per cent higher.