UK Corporate Insolvency Law Recent Developments in Light of the Global Financial Crisis

1. UK Corporate Insolvency Law Recent Developments in Light of the Global Financial Crisis Dr Michael Schillig School of Law King’s College London 1

2. Overview Cork Report, 1982; Insolvency Act 1986; Enterprise Act 2002 Administration Company Voluntary Arrangement Scheme of Arrangement Voluntary winding up by the creditors Compulsory winding up by the court

3. Overview Recent Developments • Pre-packaged administrations in the European context • The UNCITRAL Model Law in action • The anti-deprivation rule under scrutiny 3

4. Destination pre-pack Pre-pack administration • Pre-arranged sale of the business immediately on appointment of the administrator • Prior approval by creditors’ meeting or leave of the court is not required • Only ex post facto challenge by creditors 4

5. Destination pre-pack European Insolvency Regulation • Centre of main interests • Presumption in favour of the registered office • Eurofood: rebuttable by objective criteria ascertainable by third parties 5

6. Destination pre-pack Wind Hellas restructuring • Wind Hellas owned by Hellas II registered in Luxembourg • Hellas II moves COMI to England • Administrator sells the shares in Wind Hellas to Weather Finance • 1.4 billion EUR of junior (unsecured) notes remain with Hellas II

7. The UNCITRAL Model Law in Action Cross-Border Insolvency Regulations 2006 • ‘foreign representative’ may apply for recognition • as ‘foreign proceeding’ • which will be a ‘foreign main proceeding’ • if COMI is situated in the state of that proceeding

8. The UNCITRAL Model Law in Action Re Stanford Bank Ltd (in receivership) [2010] WL 605796 (CA) • US receivership: did not qualify as ‘foreign proceeding’ • Antiguan liquidation: did qualify as ‘foreign proceeding’ • DoJ/SFO restraint order 8

9. The UNCITRAL Model Law in action Re Stanford Bank Ltd (in receivership) [2010] WL 605796 (CA) • Pursuant to the Eurofood test, SIB’s COMI was in Antigua • Administrative priority for DoJ/SFO as this would save costs • Recognition as foreign main proceeding subject to restraint order

10. Anti-deprivation under scrutiny Pari passu principle and anti-deprivation rule • All unsecured creditors share the assets on a pro rata basis. • It is not possible to contract out of the Insolvency Act 1986. • An interest may be limited so that it comes to an end when the company goes into winding up.

11. Anti-deprivation under scrutiny Perpetual v BNY [2009] EWCA Civ 1160 N I BNY LBSF

12. Anti-deprivation under scrutiny Perpetual v BNY [2009] EWCA Civ 1160 • ‘flip’ from swap counter party priority to noteholder priority • LBSF’s charge has been subject to the ‘flip’ from the start • Anti-deprivation rule does not apply • But: LBSF v BNY, Bkrtcy SDNY 2010: ‘flip’ as unenforceable ipso facto clause

13. Conclusion • Overall well equipped • Emphasis on party autonomy • UNCITRAL Model Law as effective tool • Concerns about pre-packs: race to the bottom? 13