The Supreme Court handed down an important judgement last week in the case of BNY Corporate Trustee Services Limited v Eurosail - UK 2007 - 3BL PLC ("the Eurosail Case"), which needs to be considered by anyone who is a party to a contract which contains events of default relating to the insolvency of a party to that contract.
Background
The Supreme Court has delivered a judgment providing welcome clarification on the construction and effect of section 123(2) of the Insolvency Act 1986 (the "balance-sheet" insolvency test) and its interaction with section 123(1)(e) of the Act (the "cash flow" insolvency test).
What does the decision mean?
The recent decision in BNY Corporate Trustee Services Limited v Eurosail - UK 2007 - 3BL PLC (Eurosail) has provided helpful guidance on the interpretation of the insolvency tests set out in section 123 of the Insolvency Act 1986. This guidance is not only relevant to companies with financial problems. The common practice of drafting contractual events of default by reference to section 123 means that it has significance to anyone who is creating or is party to contracts (whether finance documents or other commercial contracts) containing this type of provision.
The Government has decided to create a Special Administration Regime (SAR) for systemically important payment and securities settlement systems. It is concerned that, were one of these market infrastructures to become insolvent, the administrator or liquidator would have to work towards maximising value for creditors, rather than keeping critical payment and settlement services running. The Bank of England would have the power to apply to court for an order declaring the start of SAR proceedings. Ensuring continuity of service would be among the special administrator’s objectives.
BoE has published a paper on central counterparty (CCP) loss-allocation rules. To avoid a CCP’s insolvency, these rules allocate among the CCP’s participants any losses exceeding the CCP’s pre-funded default resources, such as the margin posted by clearing members (CMs), the mutualised default fund and the CCP’s own equity. The options the paper suggests include calling additional resources from CMs, applying haircuts to margin owed to any CM or terminating unmatched open contracts.
UK Supreme Court decision confirms traditional rules on enforcement of all US judgments in England and reverses a significant liberalisation of cross-border bankruptcy law.
The UK Supreme Court today delivered an important decision on the meaning of the so-called 'balance sheet insolvency test' in s.123(2) of the Insolvency Act 1986 (UK) (BNY Corporate Trustee Services Limited v Eurosail 2007-3BL PLC [2013] UKSC 28 ("Eurosail")).
Following last weeks’ report from the Banking Standards Commission in which three former senior executives of HBOS were heavily criticised thoughts have turned to whether or not there is enough evidence for the executives to have disqualification proceedings brought against them. The report named the three executives responsible, and said that the bank, having run up £47bn losses in bad loans, would have gone bust even if the 2008 financial crisis had not happened.
How can a director be disqualified?
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