Insolvency & Restructuring News

The ILA Annual Conference 2016 - Oxford


The ILA is very grateful to the Honourable Mr Justice Snowden for chairing this year's Annual Conference. In his opening words, Mr Justice Snowden highlighted how fortunate the insolvency profession is in the presence in the Court of Appeal of Lords Justice Briggs and David Richards and Lady Justice Gloster, and also referred to initiatives in the High Court (the new Financial List and a pilot scheme for shorter trials), which, with an accelerated process, will be well-suited to insolvency matters. As in previous years, the Annual Conference covered a broad range of hot topics, and prompted lively debate among and interventions from delegates. The ILA thanks all this year's speakers for making the conference so interesting, relevant and lively.

Our first speaker was David Ereira OBE, in his capacity as Chair of the Insolvency Service's Board, who gave delegates an overview of the IS' wide remit, in particular the role played by the Service in corporate insolvencies and in formulating policy. In relation to the former, David referred to the recent high-profile, and politically charged, insolvencies of the Redcar steelworks and of the charity Kids' Club, in which the Official Receiver acted as liquidator: David foresees more situations where the risks associated with accepting appointment will preclude private sector involvement. In these situations, David noted the importance of early communication and coordination between the insolvent entity, its advisers and the Official Receiver. In matters of policy, the Insolvency Service is, amongst others, following developments in the (so far limited) use of the pre-pack pool and considering the responses to the Insolvency Service's call for evidence on consultation on collective redundancies (as well as its involvement in the regulation of IPs, special administration regimes and the amended Insolvency Rules). Echoing the theme of the Academic Forum, David highlighted the importance for the government of the UK's World Bank rankings and the possibility of reforms to insolvency law as a means of boosting the current ranking of 13th. David ended his presentation by expressing the hope for increased engagement with the Insolvency Service's stakeholders, including the insolvency profession as a whole. 

Our next speakers were Linden Ife and James Pickering, both of Enterprise Chambers. Linden's presentation focussed on "Aspects of declaring dividends: the "relevant accounts" ". Linden took delegates through the provisions of s 836 CA 2006, and its CA 1985 equivalent, and the judicial decisions concerning these provisions, which held that distributions could only be made if the accounts for the immediately preceding accounting reference had been laid. Does this prevent a healthy company from declaring a dividend after its year end but before its accounts are finalised? Can the company rely on interim accounts under s 836(2) CA 2006? Why is a healthy company apparently in a worse position than a previously non-profitable or a new company? Fortunately, Linden alerted delegates to the prospect of new authority on this issue in the near future - so watch this space. James Pickering's presentation took delegates through the recent decision in Re Eliachoff (a Bankrupt) (in which he appeared for the trustee in bankruptcy), and the tensions between family law and insolvency law, in particular the relationship between matrimonial orders and bankruptcy orders, specifically whether the making of a consent order amounted to a "disposition of property" (the answer being yes),and the extent to which a bankrupt's spouse rights to seek financial relief under the MCA 1973 pass to the trustee in bankruptcy (where the Registrar held in Eliachoff that such rights do not pass)

This year's Conference was kindly sponsored by Manolete Partners plc, the UK's largest specialist acquirer and funder of insolvency litigation and the largest litigation funding firm in the Northern Hemisphere by volume of cases. Steven Cooklin, Chief Executive, and Mena Halton, Head of Legal, explained the key features of the Manelote's process and funding structure, and then took delegates through four case studies, involving at one end of the scale a sale of a claim on a director's loan account for £46,000, and at the other a misfeasance and wrongful trading claim which settled at mediation for £2.4m.  

Our final session of the morning was presented by Mark Phillips QC, who considered the vexed issue of whether giving effect to a foreign insolvency under the Insolvency Regulation or the CBIR can discharge an English law contract. Having noted the difference, in language and scope, between the CBIR (art 21) and the Insolvency Regulation (arts 4 and 5), Mark concluded that there is still no clear answer to the question. The key appears to turn on the distinction between procedural and substantive rights, begging the question whether "the effects of insolvency proceedings on current contracts..." under art 4(2)(e) of the Insolvency Regulation refer to procedural or substantive rights (and how the relevant rights could be substantive in light of the fundamental limitation that the lex concursus cannot discharge obligations governed by a different law).

The afternoon's proceedings opened with a panel session which pitted Philip Hertz (Clifford Chance) and Peter Arden QC (Erskine Chambers) against Ben Larkin (Jones Day) and Felicity Toube QC (South Square) in a debate chaired by Mr Justice Snowden: "Schemes: fair game or extreme sport?". Does the English courts' approach to schemes amount to beneficial jurisdictional innovation or legal imperialism? For Phillip and Peter, the flexibility inherent in schemes has enabled judges to respond to changes in the economic climate and debt structures, and to achieve solutions in difficult circumstances. Ben and Felicity, whilst recognising the economic contribution of the availability of schemes, cautioned against "extreme forum shopping" and straying beyond the bounds of comity. The competing arguments were tested by reference to six key questions: Discharge of third party liabilities; the "sufficient connection" test; the Brussels Regulation issue; practical difficulties; the classes test, and the correctness (or otherwise) of the Chapter 15 cases on recognition. These being put to the vote, it appears that the majority of delegates were in the "pro-schemes" camp. 

Our final two sessions saw Daniel Bayfield QC (South Square) and Euan Clarke (Linklaters LLP), the newly elected ILA President, and Russell Downes, PWC, reflect on the Lehman administration, the state of English insolvency law and practice after the global financial crisis, and future challenges.  

Daniel and Euan prefaced their retrospective on the Lehman administration with the general observation that English law deserved a pat on the back for the manner in which it had allowed the various issues which had arisen to be dealt with, including the rejection of challenges to the moratorium in the early days, the common sense approach to expenses, and the limited role played by the court in connection with the administrator's compromise powers. The difficulties which arose in Lehman in relation to client monies and assets have prompted positive developments, evidenced by the Investment Bank Special Administration Regulations (which is currently subject to further review) and the MF Global distribution plan.  

Giving the insolvency practitioner's perspective, Russell noted key changes to the nature of insolvency work: particularly the increasing number of formal insolvencies in the financial services sector; the preponderance of prepacks (which Russell stressed are key in protecting value, although the level of marketing required remains an issue); the greater involvement of pension creditors (and whether there might be a place for these to play some kind of delegated role in an insolvency process) and of funds; and the increasingly international aspects of insolvencies. The challenges facing businesses are also changing. Russell identified amongst others the significant risk posed by cyber-crime; international security (Russell had in fact just returned from Brussels, and his comments have particular resonance in light of the events which followed shortly after the conference); the fall in commodities prices and how this will impact on the funding of relevant industries; and the refinancing of high yield debt. Amongst the thorny issues which IPs have to address, Russell referenced the waterfall application in Lehman regarding withholding tax on statutory interest; the increasingly high cost of compliance; the delay in the appeal process in the English courts, and the management of risk by the IP, including the extent to which administrators can delegate or outsource (both domestically and in an international setting).

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Recent Bulletins

A key service provided by the ILA is the provision of bulletins keeping its membership up-to-date with the latest developments in insolvency law.

Below are a selection of recent topics covered:

  • Tradition Financial Services - scope of s213 IA 1986 and effect of s1032(1) CA 2006 deeming provision
  • Khilji – s283A(5) IA 1986: “inform” and “becomes aware of” bankrupt’s interest
  • BTI v Sequana – creditor duty in the Supreme Court