BusinessBusiness RecoveryLaw lords open door to foreign liquidators

Law lords open door to foreign liquidators

Law lords agree that UK assets of insolvent companies based abroad should be given to creditors

House of Lords

Ruling: House of Lords

The law lords have paved the way for foreign liquidators to seize UK assets
in cross-border insolvency disputes.

The UK’s highest court took the step partly to prevent valuable assets being
kept out of the reach of creditors when companies salt away holdings in offshore
subsidiaries.

Law lords backed the idea that the UK should co-operate with other
jurisdictions ‘as much as possible’ so the assets of insolvent companies based
abroad are given to creditors under an umbrella system.

Distressed asset managers and hedge funds are set to benefit because of the
bargaining power gained by having all of an insolvent company’s assets pooled in
one place.

The House of Lords made the watershed decision in response to a liquidation
case involving Australian company
HIH Insurance. The company
collapsed in 2001, with HIH holding reinsurance contracts written out of London.
Law Lords have now said that these assets should be sent to Australia for
distribution under Australian insolvency law.

‘The ruling may shift the starting point for how UK courts consider
international insolvency proceedings,’ Radford Goodman, a lawyer at Norton Rose
said.

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