Cross Border Restructuring and Insolvency Update - October 2016

English High Court places US company into Administration

On 7 October 2016 Ashfords' Restructuring and Insolvency Team, led by partner Alan Bennett, assisted the directors in securing an Administration order in respect of Ronin Development Corporation (the "Company").

The Company was incorporated in Princeton, New Jersey, in October 1986 under the New Jersey Business Corporation Act, and is a global marketing, consulting and research company.

Given the Company had its registered office overseas it was necessary to rebut the presumption set out in paragraph 111(1B) of Schedule B1 of the Insolvency Act 1986 that, at the date of the request to open insolvency proceedings, the Company's Centre Of Main Interests ("COMI") was located in the US, and to show instead that the COMI is located in the UK.

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Ronelp Marine Ltd v STX Offshore & Shipbuilding Co Ltd [2016] EWHC 2228 (Ch)

The English High Court were persuaded to lift the automatic stay imposed under the Cross-Border Insolvency Regulations (SI 2006/1030) in relation to Korean proceedings, to allow English litigation proceedings to be continued by an unsecured creditor.

STX Offshore & Shipbuilding Co Ltd ("STX"), a Korean shipbuilding company, entered into contracts with the claimants to build five ships through its Chinese subsidiary. STX had guaranteed the performance of the shipbuilding contracts and the guarantee was subject to English law and jurisdiction. The Chinese subsidiary entered into Chinese insolvency proceedings and the ships were not built.

The claimants issued proceedings in England under the guarantee and STX defended this application. STX argued that the contracts were unenforceable on the grounds of illegality due to a sideletter between the parties which reduced the price of the ships by $6m each. As such they argued that the contracts were illegal and unenforceable, and there could be no claim under the guarantee.

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Short stories

New bankruptcy fraud legislation comes into force in the Netherlands

On 1 July 2016 the Netherlands introduced the Penalization of Bankruptcy Fraud Amendment Act (the "Act"), aimed at encouraging companies to keep proper company records at all times.

The Act imposes an obligation on the managing directors of Dutch companies to keep all of their records up to date and accessible. A company and its directors can be held criminally liable under the Act for failing to comply with this obligation and the Act also makes the directors liable under civil law for the company's deficit if they fail to comply with the above obligation and the company goes insolvent.

If a director is found to have intentionally not kept company records, the sanction can be as much as four years' imprisonment or a fine of up to EUR 82,000. Meanwhile, even if the director has given responsibility of keeping records to a third party, but has not himself checked that this has been done properly, he can still face a sanction of up to one year's imprisonment or a fine of up to EUR 20,500.

Irish fashion retailer goes into administration

Cucco Retail Limited, trading as "Exhibit", is a popular women's fashion retailer in Northern Ireland. Exhibit has been struggling recently against the change in consumer spending patterns which has been a cause of concern for many independent retailers of a similar nature. As a result, Exhibit eventually entered into Administration earlier this month.

James Neill and Rachel Foster of HNH Group, appointed as Exhibit's Joint Administrators, said in a statement to the Irish Times that they "are currently undertaking an immediate assessment of the financial position of the company and its assets".

The female fashion sector has faced difficulties in recent years due not only to a change in consumer spending patterns, but also to its increasing saturation. Exhibit is just one of a number of fashion retailers that have recently fallen victim to the changing market conditions.

Horton v Henry - long awaited decision from UK Court of Appeal

Following a hearing in April 2016, the Court of Appeal has finally handed down its judgment in Horton v Henry [2016] EWCA Civ 989. The Trustee in Bankruptcy had appealed against the High Court's decision that he could not compel the Bankrupt to elect to draw down payments from his personal pension, where the Bankrupt was of an age that he could draw down his pension should he choose. The High Court judge held that the Bankrupt's entitlement to elect to draw down did not fall to be included in the assessment of his income under s.310(7), declining to follow the controversial decision in Raithatha v Williamson [2012] EWHC 909 (Ch). The Trustee's appeal failed, and the Court of Appeal confirmed that the High Court had taken the correct approach.

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