US company files for bankruptcy in UK

US company files for bankruptcy in UK

An historical legal decision was made last month over the insolvency of Budget Rent A Car's European Middle East and African (EMEA) operations when the US-registered company was placed into administration in the UK.

Link: Budget sold to competitor Avis

This is the first time a company registered in the US has gone into administration in the UK on such a large scale. This creates a legal precedent and makes the global insolvency of Budget, which filed for Chapter 11 bankruptcy protection last August, potentially easier.

Kroll Buchler Phillips partner Simon Freakly, who was already administrator to Budget’s UK subsidiary, applied to get the company’s EMEA business, BRACI, into UK administration. With his legal advisors at Sidley Austin Brown & Wood, Freakly convinced the court that the European bankruptcy legislation passed last year applied in this case.

Freakly explained: ‘It would be a nightmare to try to lace together all the different insolvency procedures of 12 countries.’

They proved that, as BRACI’s head office was in Hemel Hempstead, its ‘centre of main interest’ was in the UK, so it could apply for administration in Britain according to European law. Since British company law allows companies registered elsewhere to be put into UK liquidation, there should be no limit on administrations.

The case is significant because it allows companies in similar circumstances to be put into administration, no matter where they are registered. Freakley said this was a breakthrough because US bankruptcy and administration can easily run in parallel.

Nick Hood, insolvency practitioner at Begbies Traynor, said: ‘Chances are that UK creditors will do better because administration is creditor-led whereas Chapter 11 is debtor-led, so creditors have less control.’

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