Interim relief is an important tool in the insolvency context to regulate the interests of creditors against those of third parties, both prior to commencing court proceedings or during proceedings pending the outcome of an insolvency process, particularly where there is a risk of dissipation of assets by uncooperative debtors. In this month's bulletin we focus on recent cases involving interim remedies: Holly Ransley and Amy Gallimore discuss State Bank of India and others v Mallya exploring circumstances when validation orders are appropriate with a pending bankruptcy petition; Karolina Lewandowska and Alan Bennett look at the rationale for an interim freezing order continuing post-recognition of foreign proceedings in Protasov and Derev; and Cathryn Butler provides further examples of the court's recent approach to interim remedies and provides an update on the recent report by the European Systemic Risk Board in anticipation of a "tsunami" of insolvencies.
State Bank of India and others v Mallya  EWHC 191 (Ch)
This recent judgment – reported as State Bank of India and others v Mallya  EWHC 191 (Ch) - is a reminder that the court will not allow validation orders in relation to litigation that does not directly relate to defending a bankruptcy petition.
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Protasov v Derev  EWHC 392 (Ch)
The High Court of Justice, in the recent case of Protasov v Derev, determined that there was no basis for a provisional freezing order to continue after recognition of foreign bankruptcy proceedings under the UNICTRAL Model Law on Cross-Border Insolvency (the Model Law) as implemented in England & Wales by the Cross-Border Insolvency Regulations 2006.
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AYO Technology Solutions denied interim relief
AYO Technology Solutions, an IT investment and service management entity based in South Africa, filed an application for interim relief to prevent First National Bank (FNB) closing its banking facilities to AYO, due to occur on 3 May. FNB claimed that it had taken the decision to stop providing banking facilities to AYO due to reputational damage, following negative media coverage of AYO and the imposition of a 6.5million rand fine (approximately GBP 325,000.00) on AYO by the Johannesburg Stock Exchange for “errors and misstatements” in AYO’s financial reporting. AYO’s application was refused on the basis that it had delayed initiating the court proceedings and had not taken sufficient steps to find alternative bank facilities when it had had the opportunity to do so. Following refusal of the application, the AYO board is reported to be meeting to consider insolvency proceedings.
Success in Australia for Administrator of Greensill Bank AG (Greensill Bank)
Greensill Bank entered insolvency proceedings in Germany on 16 March 2021, following the administration of its parent company, Greensill Capital Pty Ltd, an Australian financier with branches worldwide. Greensill Capital’s UK subsidiary, Greensill Capital (UK) Limited, also entered administration in early March, following which headlines have emerged suggesting a lobbying scandal involving UK government officials. On 7 April 2021 Greensill Bank’s administrator won proceedings in Australia, following an interim application to freeze the Bank’s assets located there pending further investigations by the administrator.
Europe facing a ‘tsunami’ of insolvencies
A report by the European Systemic Risk Board (ESRB) has warned of a ‘tsunami’ of insolvencies across Europe as government measures introduced to help businesses through the COVID pandemic are eased. The ESRB predicted that, although insolvencies fell by almost 20% across Europe between July and September 2020, the number of insolvencies could spike by a third by the end of 2021. EU leaders were also encouraged to use appropriate insolvency procedures to avoid a rise in ‘zombie’ businesses as the measures are reduced. Germany ended a year-long waiver on insolvencies on 3 May 2021 and there are indications that insolvency applications there have already picked up.