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Cross Border Insolvency Update - May 2018

Ariel v Halabi and HMRC [2018] JRC006A 

The Jersey Court exercised their discretion and consented to vary the terms of Recognition and Consent Orders to allow a Trustee in Bankruptcy to comply with an Information Notice served by HMRC in relation to the Bankrupt's tax affairs.

This case related to an application by the Trustee in Bankruptcy of Simon Halabi for directions in relation to an Information Notice issued by HMRC in England. The Information Notice required the production of documents, some of which the Trustee had obtained in Jersey pursuant to two court orders which HMRC required to determine the Bankrupt's tax liabilities. Directions were sought as to whether compliance with the Information Notice would amount to a breach of two orders made in the Jersey Court and, if so, whether the Court should grant leave to comply with the Information Notice. Failure to comply with the Information Notice could result in a financial penalty. 

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RE Mikhail Shlosberg (2018) - Unreported

The Court held that it had jurisdiction to order a Latvian bank to disclose information regarding a bankrupt's dealings. The Joint Trustees of the Bankrupt's estate had demonstrated that their request was reasonable and was required to identify further assets that the Bankrupt might hold.

This decision is the latest that has been made in relation to the bankruptcy of Mr Shlosberg, a Russian businessman domiciled in London.  Mr Shlosberg was made bankrupt in January 2015 on a judgment debt of US$195 million plus interest.  

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Short Stories

Australian Senate Committee endorses reduction from three years to a one year bankruptcy period

The Senate Legal and Constitutional Affairs Legislation Committee has endorsed the passing of the Bankruptcy Amendment (Enterprise Incentives) Bill 2017 in its report dated 21 March 2018.

The Bill will align the bankruptcy period in Australia with the United Kingdom. Under the Bankruptcy Act 1996, the period of bankruptcy (unless a successful objection is made) is three years. If passed, the Bill will reduce the period to one year.

Key points to note are that:

  • The Bill commences six months after receiving Royal Assent
  • Trustees in Bankruptcy may be placed under increased pressure to complete investigations and take action to recover assets in a short period
  • The Corporations Act 2001may be amended to limit the risk to creditors arising from phoenix activity (this may include, for example, increasing the director disqualification period from five to seven years).

Bottoms down for Bargain Booze

Conviviality, the company that owns Bargain Booze, Wine Rack and acts as supplier to Wetherspoons, Slug & Lettuce and many others, entered Administration on 4 April. The company's collapse was sudden and unexpected - as late as 8 March its stock market value was over £550 million, but its share price fell from 301p to 123p in less than 24 hours. This wiped £300 million off the company's value, a drop from which it never recovered. Commentators say the company's rapid expansion strategy had seen it overreach itself and an accounting error resulting in an unexpected £30m tax bill devastated confidence in the company's management.  

The sudden collapse took many by surprise but Administrators were able to sell the wholesale arm of the business to  Dublin-based C&C Group, safeguarding more than 1,800 jobs.

Weinstein Company files for Bankruptcy

The New York movie studio co-founded by film producer Harvey Weinstein has filed for Chapter 11 bankruptcy. The bankruptcy was intended to facilitate a buy-out offer from Lantern Capital, a private equity firm, to purchase the assets of the company, including the rights to the show "Project Runway", as well as "Django Unchained" and approximately 275 other films. Lantern Capital had offered $225 million which it believed was the studio's debts. However the sale collapsed when Lantern Capital discovered the studio had an additional $55 million - $65 million in debt. If the sale had proceeded, it had been intended to set up a victim's fund worth up to $90 million. The company will be known as the first high-profile firm to go into bankruptcy as a direct result of alleged workplace sexual misconduct.