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Cross Border Restructuring and Insolvency Update - January 2018

Gunel Bakhshiyeva (in her capacity as the Foreign Representative of The OJSC International Bank Of Azerbaijan) v Sberbank Of Russia & 6 Ors [2018] EWHC 59 (Ch)

The High Court held that a moratorium in relation to restructuring proceedings in Azerbaijan could not be extended in breach of the Gibbs rule, allowing two significant creditors to proceed with their claims in the English Courts.

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What Constitutes a "Measure of Enforcement" and When does a Foreign Judgment Registered in the UK become "Effective and Enforceable"

Cyprus Popular Bank Public Co Ltd v (1) Andreas Vgenopoulos, (2) Efthimos Bouloutas, (3) Kyriacos Mageiras, (4) Marfin Investment Group Holdings [2018] EWCA Civ 1)

On 23 May 2014, the Special Administrator of Cyprus Popular Bank Public Co Ltd ("Cyprus Bank") obtained a final worldwide freezing order against the Respondents in the District Court of Nicosia, Cyprus (the "Freezing Order").

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Short stories

Review of the pre-pack industry measures


The Insolvency Service has announced that the UK government is planning to conduct an assessment of the impact of the voluntary industry measures introduced in November 2015 to improve the transparency of connected party pre-pack sales in Administration.

The 2014 Graham Review found that pre-pack sales were a useful business rescue tool but noted that there was evidence of less successful outcomes where the pre-pack sale was to a connected party.

In addition to the voluntary industry measures, the Small Business, Enterprise and Employment Act 2015 also created a power for the government to impose conditions on property sales to connected parties in Administration (including via a pre-pack). This power expires in May 2020.

The government assessment will look at the impact of both the legislation and voluntary reforms on all connected party sales in Administration. The review will help to inform decisions on whether further regulation is needed prior to the expiration of the regulation making power.

Duncan Swift, deputy vice president at insolvency and restructuring trade body R3, said the review provided "a good opportunity to examine the role pre-pack Administrations play in the UK’s business rescue landscape" in the run up to the 2020 deadline.

High Court cures defective administrator appointment made while winding-up petition outstanding

In Endersby and Coote v Astrosoccer 4 U Ltd the High Court made a retrospective Administration order over a company that was subject to a winding-up petition to "cure" an invalid directors' out-of-court appointment of Administrators.

Astrosoccer 4 U (the "Company") had been ordered to pay £175,962 plus interest to a creditor. The directors of the Company had filed a Notice of Intention to appoint Administrators ("NOI") in order to prevent the creditor from enforcing their award. The Technology and Construction Court ("TCC") allowed the creditor to enforce the aware as it did not find evidence that the company was insolvent on a cash flow or balance sheet basis. It later emerged that the creditor had filed a winding up petition against the Company a few hours before the directors had filed the NOI. The TCC was not aware of the winding up petition but did comment that the NOI was likely to be defective.

The directors of the Company applied for a retrospective Administration order, to take effect from the date of the defective NOI.

The High Court made the retrospective order as it found that:

• there was sufficient evidence to show that company was insolvent on a cash flow basis and a balance sheet basis;

• Administration was likely to achieve a better return for creditors as a whole than a Liquidation. The Administrators had already commenced work and received a expressions of interest for the company's site and business. It was in the best interests of the creditors for the Administration to continue; and

• the Court had the discretion to make a retrospective order appointing Administrators as at the date of the ineffective out-of-court appointment. DJ Lesley Anderson noted that the Technology and Construction Court may not have had the "full picture" in relation to the winding up petition and NOI.

This provides further clarification from Re Business Dream Ltd (In Liquidation) [2011] EWHC 2860 (Ch) in that administration appointments following an NOI filed after a winding up petition are not usually effective.

This update was written by David Pomeroy, Alan Bennett, Olivia Bridger and Kyla Payne.

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