Paul Hastings Represents Capita Asset Services in Securing First Administration of Isle of Man company in the English Courts
March 12, 2014
London, UK -- Paul Hastings LLP, a leading global law firm, represented Capita Asset Services (London) Limited (“Capita”) in a successful bid to place Gulldale Limited, an Isle of Man incorporated company, into administration in England in the interest of restructuring the company from insolvency.
This is the first time an Isle of Man incorporated company has been placed into an English administration. Gulldale, a company incorporated in and with its centre of main interest in the Isle of Man, did not fall within the principal definition of “company” under the Insolvency Act 1986 and thus the English Court had no jurisdiction to place Gulldale into administration in England, unless it did so pursuant to a request from the Manx Court received under section 426 of IA 1986.
Capita acts as Servicer and Security Agent in respect of a loan to Gulldale Limited. Gulldale forms part of a group of companies that owns long leasehold interests in a number of large, high-profile properties in the City of London. The beneficial interest in the properties was held by Gulldale and the legal interest was vested in two related English companies. The structure had been financed by lending secured over the properties. This loan was the principal credit obligation owed by Gulldale, and was managed by Capita.
The loan was in default with the result that in late 2013 receivers had been appointed over the properties and the two English companies had been placed into administration. Capita, as Special Servicer of the loan, concluded that, in order to provide the best landscape for enforcement and maximizing realisations, it was preferable for all of the companies in the structure to be in the control of administrators in England. Isle of Man insolvency law does not include a process equivalent to administration and it was considered that placing Gulldale into liquidation (or even provisional liquidation) in the Isle of Man could be detrimental to the realisation strategy.
After some uncertainty in English insolvency circles caused by the first instance decision in the case of Re Tambrook, the Court of Appeal subsequently confirmed that an overseas company could be placed in an English administration if a proper request under section 426 of the Insolvency Act 1986 were made by the court in the home jurisdiction – even if there were no ongoing proceedings in that jurisdiction. The Gulldale matter was the first time this took place in respect of an Isle of Man company. In prior cases involving other jurisdictions it was crystal clear that the local insolvency proceedings would be value destructive, and that administration in England would be more appropriate.
In the Isle of Man, however, a more modern approach to restructuring has been evolving, and the domestic procedures are not necessarily as destructive as those in other jurisdictions. However, in Gulldale’s case the Manx Court was nevertheless satisfied that an English administration was appropriate and issued a Letter of Request to the English Court asking that an administration order be made. After reviewing the Letter of Request, and the other evidence brought by Capita, the English Court was satisfied that the administration order should be made.
Advice to Capita on this matter is being led by Paul Hastings partner
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