Cross Border Restructuring and Insolvency Update - February 2017

The High Court considers questions relating to the location of three companies' COMIs and an alleged "improper motive" regarding the appointment of administrators

This case concerned the Administration of three companies: FREP (Knowle) Limited, FREP (Ellesmere Port) Limited and FREP (Belle Vale) Limited (the "Companies"). The Companies were all incorporated in Jersey and have the same registered office, also in Jersey. However, each of the Companies also owns a shopping centre, located in Cheshire, Liverpool and Bristol respectively, which are managed by Frogmore Real Estate Investment Managers Limited (the "Management Company"). The Management Company was incorporated in England and Wales and its registered address is in London.

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Akers v Samba Financial Group [2017] UKSC 6

In 2014 we reported on the High Court [] and Court of Appeal [] decisions. The Supreme Court has now overturned a 2014 Court of Appeal decision in favour of the Liquidators. The Supreme Court ruled that section 127 only applied to assets legally owned by the company that it sells itself, and did not cover the transfer of legal rights held by a third party.

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Short stories

UK New Insolvency Rules 2016

The new Insolvency Rules 2016 come into force on 6 April 2017. They aim to reorder and restructure the rules currently contained in the Insolvency Rules 1986, consolidating 28 pieces of amending legislation, and provide a number of substantive amendments to existing insolvency law and practice. Please see a more detailed summary of what they mean for the insolvency profession here.

Football League new insolvency rules

The Football League have announced tougher insolvency rules, in which clubs will face stricter sanctions and be forced to repay the majority of their debts to unsecured creditors. Clubs entering Administration will face an increased 12-point deduction, which could rise to 15 if they do not repay creditors. The Football Creditors’ Rule guarantee 100% repayment of debts to clubs and players for transfers and wages. This will be retained but unsecured creditors will now receive a minimum of 25p/£, which must be paid upon takeover of the club. If not paid, this rises to a minimum of 35p/£ over 3 years. Failure to comply will result in a further 15 point deduction. Administrators will also be required to market clubs for at least 21 days, and provide the club’s supporters’ trust with the opportunity to bid for the club.

Bosnia and Herzegovina - Unconstitutional payments in bankruptcy proceedings

In a recent judgment, the Constitutional Court of Bosnia and Herzegovina has found that the current order of settlement of workers' claims in bankruptcy proceedings is unconstitutional.

Previously workers' claims generally belonged to the category of higher payment priority within bankruptcy proceedings; however they were settled only after the costs of the bankruptcy proceedings, the debts of the bankruptcy estate and the debts of interim administration are settled.

Even with the higher payment priority category, the full settlement of workers' claims were limited by capping the wages to minimum wage, and by time limit, being only for the 8 months prior to proceedings being opened.

The court found the payment order, wage cap and time limit unconstitutional. Therefore, the provisions governing the settlement of the costs of the bankruptcy proceedings, debts of the bankruptcy estate and the higher payment priority category have been declared unconstitutional in their entirety.

The Court has not issued an interim measure to replace these provisions. Parliament will soon vote on the draft new bankruptcy laws which it is expected will provide for a different settlement order.

This update was jointly written by Alan Bennett and Olivia Reader.

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