In a recent landmark ruling, the UK Supreme Court deliberated on the question of whether an overseas defendant had to have submitted to the jurisdiction under common law before a foreign bankruptcy order would be recognised and enforced in England. Richard Keady and Jay Qin of Bird & Bird consider the practical implications of the decision and the significance it may have on practitioners going forward.

It is fairly common for solicitors to act for both the petitioning creditor in an insolvency as well as for the insolvency practitioner appointed as liquidator. Of course, there is always the potential for a conflict of interest to arise and it can be tricky for solicitors, once involved, to be objective and determine when it is appropriate to withdraw from acting.

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

In normal circumstances, a director’s primary duty (owed to the company, not the company’s shareholders or the corporate group) is to promote the success of the company for the benefit of its shareholders as a whole. When a company enters a period of financial distress (the so-called “zone of insolvency”) there is a shift of emphasis in the duties of the directors: directors must consider the interests of the company’s creditors and, depending on the extent of the financial distress, may need to prioritise such interests over those of its members.

The financially challenged NHS trust which in July became the first to be put into the Regime for Unsustainable NHS Providers should be dissolved, according to its special administrator.

The Government has fed back on the responses to DBIS’s consultation on the effect of bankruptcy on the ability to access a basic bank account. Responses to the consultation have shown that only 27% of people subject to a bankruptcy order are able to retain their bank account. A bank's decision not to offer a bank account to a bankrupt is mainly based on the bankrupt's credit record, rather than on the risk of the trustee making a claim against the bank, a risk that the consultation process has shown is more perceived than real.

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

Common Starting Points

• Failing UK business.
• Proposed withdrawal from UK market following unsuccessful operations of an international group.
• Proposed solvent restructure involving corporates incorporated in the UK.

Common Questions Raised by Corporations Facing These Difficulties

Insolvency of the suspected fraudster may seem the end of the hunt, unless an egg-hunter can establish a proprietary interest in the assets (see our blog yesterday). But it can offer additional clues, or alternative pots of treasure, whether the fraudster is an individual or corporate entity.