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Insolvency News Bulletin - March 2021

The recently handed-down judgment in Uralkali v Rowley & anor (Re Force India Formula One Team Limited) demonstrates the court's understanding of the task faced by office-holders dealing with a multitude of stakeholders and competing interests, often when time is at a premium. In this bulletin we focus on IPs' professional responsibilities through the lens of the Force India decision: Katie Farmer  discusses the duties owed to bidders; Amy Gallimore  and Karolina Lewandowska explore the liability of joint office-holders; and Cathryn Butler comments on flexibility as to record-keeping.

Force India - IPs' duties to third party bidders in a sales process

The Court has recently been asked to consider the extent to which IPs conducting sales owe duties to bidders and buyers. In Uralkali v Rowley [2020] EWHC 3442 (Ch), a prospective purchaser of the Force India F1 racing team brought claims in negligence against the administrators of the company which owned and operated that racing team, for events relating to the sale and bidding process.

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Force India – liability of joint office-holders

The recent decision in Uralkali v Rowley [2020] EWHC 3442 (Ch) provides some comfort to office-holders taking on joint appointments that they will not be automatically held jointly and severally liable for each other's actions.

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Force India – recording decisions

Insolvency Practitioners are required to keep records of decisions to sufficiently demonstrate the administration of each matter and any decisions made which materially affect the case pursuant to regulation 13 of The Insolvency Practitioners Regulations 2005 (the IP Regs).

In the Force India case, the claimant sought to argue that the administrators had breached the IP Regs by not keeping sufficient records, in particular by not producing a separate note recording their reasoning in reaching a decision on the bid process. Mr Justice Miles did not consider that there had been a breach and found that in fact the administrators had recorded sufficient information to explain their decision by way of emails, letters and counsel’s opinions. A separate note was not required.

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Statements of Insolvency Practice – Updates

A reminder that three of the Statements of Insolvency Practice (SIP) are being updated effective from 1 April 2021. The changes relate primarily to the transparency and clarity of information, as well as ensuring consistency. The three affected SIPs are:

SIP 3.2 – Company voluntary arrangements
SIP 7 – Presentation of financial information in insolvency proceedings
SIP 9 – Payments to insolvency office holders and their associates
It is anticipated that SIP 16 (Pre-packaged sales in administrations) will also be updated to align with the Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021, which are anticipated to commence on 30 April 2021 although changes have not yet been made.

 

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