Articles by author
The mysterious pari passu principle
We know that Lord Justice Snowden’s landmark judgment for a unanimous Court of Appeal in Adler earlier this year1 emphasised the presumptive importance of the pari passu principle. But what does this principle amount to? What does it require? The term “pari passu” is used in judicial and textbook writings to refer to no fewer than four different principles. Regrettably, this is a reliable recipe for confusion. Three of these principles relate to distribution of value from the insolvency estate but are very different from each other, while the fourth is a principle of conservation rather than distribution. The undifferentiated and unreflective use of the term “pari passu” for one or other of these four principles leads to mistakes of both analysis and decision. This article explains the four principles, outlines the ways in which they differ, highlights the confusion resulting from not distinguishing amongst them, and argues that the term “pari passu” should be restricted to only one of the four.
28 JUN 2024The court’s discretion in relation to the Pt 26A cram down
This article explains that a fundamental purpose of the court’s discretion whether to exercise its cram down power under the new Pt 26A process now found in the Companies Act 2006 would be to ascertain whether the dissenting class was promised a just and equitable distribution of the restructuring surplus, ie the value expected to be preserved and perhaps created by the proposed plan itself. By way of comparison, Chapter 11 of the US Bankruptcy Code, which contains the best-known cram down mechanism, requires the court to ensure a “fair and equitable” treatment of members of the dissenting class. In the US, however, the much-misunderstood Absolute Priority Rule (APR) supposedly governs this exercise. This article shows that the APR is untenable and is honoured as much in breach in US practice as in observance. Similarly, the cram down powers under the new Dutch and the proposed German restructuring regimes also envisage “exceptions” to the APR which in practice may well overwhelm the rule. Understanding why the APR cannot and should not govern the distribution of the restructuring surplus goes a considerable way to establishing that distribution of the restructuring surplus by reference to the relative contributions to the restructuring surplus by the dissenting and all junior classes provides the appropriate starting point. The article also considers the appropriate treatment of “new money” and “sweat equity”, and of classes excluded from the plan.
1 JAN 2021Does the liquidator have a duty to deal with trust assets?
The extent, if any, to which the liquidator of a corporate trustee is under duties in relation to trust property has received very limited attention from the English courts. The point is important since corporate trustees collectively hold property worth trillions. If such trustees cannot be placed in special administration proceedings or if the administrator of a corporate trustee is unable fully to deal with trust property prior to the end of the special administration, the absence of any duty on the liquidator to deal with such property in some appropriate way would open up a serious lacuna in the efficacy of the liquidation regime. This article sets out tentative and exploratory considerations that may assist a court asked to address this question.
1 MAY 2022What is an insolvency proceeding?
To the question in the title, one may be forgiven the innocent response “Who cares?”. In fact, the question matters for all the reasons that legal categorisation matters, and it matters particularly clearly in the context of insolvency. In this article I explain the importance of the question. (This article is adapted from a longer piece which draws on functional, historical, comparative and doctrinal analyses.1)
1 APR 2023
