The joint liquidators of a company, which had been compulsorily wound up in England and Wales, sought orders under section 236 of the Insolvency Act 1986 (“IA86”) for production of documents and an account of dealings with the company, in respect of companies in Italy. The question for the Court was whether s236 IA86 had extraterritorial effect. The problem for the court was that there was competing first instance decisions both for and against.
On 1 June 2020, Morgan J granted ex parte application to restrain the presentation of a winding up petition by a landlord of its tenant company, a high street retailer.
The judgment can be read here.
The tenant had been required to close the premises from which it traded in accordance with the instructions from the Government in response to the Covid-19 pandemic. This resulted in a failure to pay rent and service charges.
Winding up a company – liquidation – applies in circumstances where a company is unable to pay its debts. In that situation, the company's directors, creditors or contributories can present a winding up petition. (This can be found in sections 122, 123 and 124 of the Insolvency Act 1986.)
A company is deemed unable to pay its debts if:
The Supreme Court in Sevilleja v Marex Financial Ltd [2020] UKSC 31 has brought much needed clarity to the legal basis and scope of the so-called ‘reflective loss’ principle. The effect of the decision is a ‘bright line’ rule that bars claims by shareholders for loss in value of their shares arising as a consequence of the company having suffered loss, in respect of which the company has a cause of action against the same wrong-doer.
It is a sad reality that the Covid-19 Pandemic is likely to lead to a spike in the number of companies being put into insolvency. This has the potential to leave parties with claims against those companies with a reduced prospect of full recovery, even if their claims are strong. As a result, claimants may look for alternative targets, including ways in which they could sue directors personally.
No two commercial mediations are the same.
However, there are three elements common to most cases:
1. Legal – in the absence of a consensual settlement, the law will decide the issue.
2. Commercial – all by definition have a commercial component – usually money.
3. Emotional – to a greater or less extent, where people are involved, emotions will play a part. The dispute may be a business dispute, but businesses are run by people, each of whom has his/her own drivers.
GOVERNANCE & SECURITIES LAW FOCUS
JULY 2020/EUROPE EDITION
Below is a summary of the main developments in U.S., EU, U.K. and Italian corporate governance and securities law since our last update in April 2020.
See our page dedicated to the latest financial regulatory developments.
IN THIS ISSUE
This is inevitably a challenging time for many company directors throughout Northern Ireland and beyond. Businesses have been faced with a quite unprecedented set of social and economic circumstances due to the Covid-19 pandemic and now, as lockdown has eased and restrictions begin to be lifted, the focus turns to how those businesses that have been most severely impacted by this crisis will evolve. Directors are no doubt busy strategising how to best ensure their company’s immediate short term stability and in time their longer term growth and prosperity.
The Abu Dhabi Global Market (ADGM)continues to enhance its legislative framework after recently publishing its fourth round of amendments to the ADGM Insolvency Regulations 2015.
As part of the latest round of amendments, the ADGM has introduced a new chapter dealing with priority funding (PDF), similar to US Chapter 11 style debtor-in-possession (DIP) funding.