Tower Bridge London

High Court Brings Clarity to Cross-Border Insolvency Regulations

By Jenni Jenkins and George Jackson, Memery Crystal LLP

In 2006, Great Britain gave effect to the Cross-Border Insolvency Regulations (CBIR) (which enacts the UNCITRAL Model Law and is the equivalent of US Chapter 15), which provides a framework for English courts to recognise crossborder insolvency proceedings.

The CBIR was intended to simplify multi-jurisdictional insolvencies. However, until recently it had not been tested in the English courts and ambiguities remained regarding its pplication. One grey area was the winding-up of solvent companies.

While the Guide to the Enactment to the Model Law provides that the CBIR is only engaged when “the debtor is insolvent or in severe financial distress”, many legal systems allow shareholders to bring a winding-up petition on a voluntary basis where there are no concerns as to the claims of creditors.

The recent case of Re Sturgeon Central Asia Balanced Fund Ltd [2019] EWHC 1215 (Ch) has clarified the legal position.

The company in question, incorporated in Bermuda, was a closed-ended investment fund. In March 2018, the Court of Appeal for Bermuda ordered that the fund be wound up on just and equitable grounds. The liquidators applied for recognition of the proceedings in Great Britain under the CBIR.

In the High Court on 17 May this year, Mr Justice Falk found that the CBIR applies to proceedings where companies have been wound up on just and equitable grounds. Insolvency is therefore not a necessary factor, contrary to the Guide to Enactment. The decision has been welcomed as it removes the potential for courts to become bogged down in “(in)effcient… factual enquiry”: assessing whether a company, perhaps incorporated in another continent, is unable to pay its debts when they fall due.

Going forward, in considering whether the CBIR applies, the courts need only consider whether the law of the foreign proceedings relates to insolvency, not whether the entity subject to those proceedings is insolvent.


Jenni Jenkins

Jenni Jenkins

GGI member firm
Memery Crystal LLP
Law Firm Services
London, UK
T: +44 207 242 5905
E: This email address is being protected from spambots. You need JavaScript enabled to view it.
W: www.memerycrystal.com

Memery Crystal LLP acts for a broad range of clients, from multinational companies to financial institutions and individual entrepreneurs, offering a partner-led service that prides itself on the strength of its client relationships.

Jenni Jenkins is a Partner at Memery Crystal, specialising in commercial fraud and insolvency.
George Jackson

George Jackson

GGI member firm
Memery Crystal LLP
Law Firm Services
London, UK
T: +44 207 242 5905
E: This email address is being protected from spambots. You need JavaScript enabled to view it.
W: www.memerycrystal.com

George Jackson is a trainee solicitor at Memery Crystal, currently completing a seat in dispute resolution.
 


Published: Debt Collection, Restructuring & Insolvency Newsletter, No. 11, Autumn 2019 l Photo: Pawel - stock.adobe.com

GGI Logo 70x50px

GGI Geneva Group
International AG

Schaffhauserstrasse 550
P.O. Box 286
8052 Zurich
Switzerland

Contact

T: +41 44 2561818
F: +41 44 2561811
This email address is being protected from spambots. You need JavaScript enabled to view it.
www.ggi.com