Supreme Court decides there is no point to the 'point of no return' test for insolvency defaults
By Brian Cain
The wording of the provisions contained in section 123 of the Insolvency Act 1986 is often incorporated into finance documents — in the instant case some loan notes — so that an event of default will occur if the debtor becomes insolvent within the meaning of the section.
Eurosail was a Lehman Brothers group special-purpose vehicle (SPV) set up to be the issuer of the relevant series of notes. BNY was the trustee of the loan notes. Section 123 with some minor modifications that are not material was incorporated into the notes. If Eurosail was unable to pay its debts within the meaning of section 123, BNY then had to decide whether to certify that occurrence as being materially prejudicial to the interests of the noteholders. If BNY certified Eurosail was unable to pay its debts within the meaning of section 123, there was an event of default. The effect of that would be to materially alter the ranking of the various noteholders in relation to their priority for payment of principal due on the notes. There was consequently a dispute between the noteholders of various classes as to how section 123 and the provision in the notes should be construed and applied. The question for the Supreme Court was whether Eurosail was unable to pay its debts as they fell due within the meaning of section 123…
If you are registered and logged in to the site, click on the link below to read the rest of the Taylor Wessing briefing. If not, please register or sign in with your details below.
Sign in or Register to continue reading this article
It's quick, easy and free!
It takes just 5 minutes to register. Answer a few simple questions and once completed you’ll have instant access.Register now
Why register to The Lawyer
In-depth, expert analysis into the stories behind the headlines from our leading team of journalists.
Identify the major players and business opportunities within a particular region through our series of free, special reports.
Receive your pick of The Lawyer's daily and weekly email newsletters, tailored by practice area, region and job function.
More relevant to you
To continue providing the best analysis, insight and news across the legal market we are collecting some information about who you are, what you do and where you work to improve The Lawyer and make it more relevant to you.
News from Taylor Wessing
News from The Lawyer
Briefings from Taylor Wessing
For the tax year from 6 April 2014, the standard lifetime allowance has reduced from £1.5m to £1.25m.
One of the areas highlighted last year by the Regulator was the regulation of workplace DC pension schemes.
Analysis from The Lawyer
As the equity capital markets rocketed back into favour and global M&A saw at least a partial return to form, there have been some rich pickings for The Lawyer’s Corporate Team of the Year award shortlisted firms in 2014.
The city-state is working hard to become a global wealth management hub, and law firms are gearing up for a prosperous new world