OCTOBER 2003 RECENT CHANGES IN THE UK AND EU LAW AND THEIR EFFECT ON YOUR BUSINESS

In Short...Corporate &

THE ENTERPRISE ACT 2002 — A qualifying is one which is created by CORPORATE INSOLVENCY PROVISIONS an instrument which expressly states that paragraph 14 of Schedule B1 applies to it or empowers the holder to appoint Background an administrative receiver or an administrator of the company. The corporate insolvency provisions of the Enterprise Act, The company will enter and the intended to promote a rescue culture, for which the administration will commence when the appointment of administration and CVA procedures were originally an administrator takes effect. introduced by IA 1986, came into force on 15 September If the company is already in , it may only 2003. enter administration upon an application by the The provisions contain substantial amendments to be or the holder of a qualifying floating charge. made to IA 1986, with the majority of the new provisions to be included in Schedules to the Act, including:- Purposes •A new administration régime; • Removal of the floating charge holder’s right to The Enterprise Act replaces the four statutory purposes for appoint an administrative receiver (except for certain which administration orders have been made with one, to capital markets arrangements and public/private rescue the company (i.e. not just the business). Where that is partnership projects where administrative not reasonably practicable, the administrator should is preserved); perform his functions with the objective of achieving a • Abolition of Crown preference in all . better result for the company’s as a whole than would be likely if the company had been wound up (without first The New Administration Procedure being in administration). Where that is not reasonably practicable, the administrator’s objective must be to realize The existing provisions of IA 1986 (Sections 8 to 27) are property in order to make a distribution to one or more replaced by a new Schedule B 1, to IA 1986. secured or preferential creditors. Administrators may be appointed: • by the Court, upon the application of the company, Administrator’s duties its directors or liquidator, one or more of its creditors (including contingent and prospective creditors), the The administrator is an officer of the court and must holder of a qualifying floating charge (see below), exercise his functions in the interests of the company’s the justices’ chief executive for a Magistrates’ Court creditors as a whole. Where he can only reasonably realize or a combination of two or more of these parties; property for one or more secured or preferential creditors, • out of court by the holder of a qualifying floating he must ensure that he does not unnecessarily harm the charge; or interests of the company’s creditors as a whole. • out of court by the company or its directors.

©2003 Jones Day Gouldens. All rights reserved. Powers of the Court having been approved, or since the conclusion of any failed CVA; Where any party other than the holder of a qualifying floating • at least five business days’ written notice is given (or less charge applies to the Court for an administration order, it with the consent of the relevant parties) of their will only be made where the Court is satisfied that the company intention to do so to (i) any party entitled to appoint an is or is likely to become insolvent and that the order is administrative receiver; (ii) any party entitled to make a reasonably likely to achieve the purpose of administration. Paragraph 14 appointment; However, holders of a qualifying floating charge are only • there is filed at Court a copy of the relevant notice required to satisfy the Court that they are entitled to make an together with a statutory declaration that the company appointment. is or is likely to become unable to pay its debts. Once the company or its directors have complied with Out of Court appointments this obligation they may appoint an administrator out of court provided they do so not less than five and no more than ten The most radical amendment since the publication of the business days after the notice of intention to appoint is filed original White Paper on 31 July 2001, is the introduction of at Court. appointments of administrators out of court by the holder of In the event that a Paragraph 22 appointment is a floating charge or a company’s directors. subsequently found to be invalid, the Court may order the The holder of a qualifying floating charge may appoint appointors to indemnify the person appointed against an administrator of the company out of court: liabilities arising solely as a result of the defective appointment. • provided the floating charge is enforceable and neither a provisional liquidator nor an administrative receiver Prohibition of appointment of has already been appointed; Administrative Receivers • by giving not less than two business days’ notice to the holder of any prior ranking qualifying floating charge; No administrative receiver may be appointed in respect of • by filing at Court the requisite papers which will any qualifying floating charge, subject to certain prescribed comprise a notice of appointment and other formal exceptions (see below). prescribed documents. As stated, a qualifying floating charge is one created by The appointment takes effect as soon as all requisite an instrument to which Paragraph 14 of Schedule B1 is stated papers are filed at Court, whereupon a moratorium comes to apply, or which empowers the holder to appoint an into being so that no action may be taken against the company administrative receiver or administrator of the company. or its property (including steps to realize security) except with The exceptions are: the administrator’s consent or leave of the Court. • Capital markets arrangements; The notice of appointment must include a statutory • Public private partnerships; declaration by or on behalf of the appointor that it is entitled • Utility projects; to appoint an administrator and that the appointment has • Project finance; been in accordance with the Schedule. It must be • Financial markets contracts. accompanied by a statement by the administrator that he consents to act and that in his opinion the purpose of Abolition of Crown preference administration is “reasonably likely to be achieved”. In the event that the appointment is subsequently found The anticipated abolition of Crown preference has been to be invalid, the Court may order the appointor to indemnify achieved by deleting the relevant paragraphs of Schedule 6 to the person appointed against liability arising solely as a result IA 1986 which referred to Social Security contributions and of the defective appointment. debts due to HM Customs & Excise and the Inland Revenue. Under Paragraph 22 of Schedule B1, the company or its directors may appoint an administrator out of Court provided that: CORPORATE RESTRUCTURING •there is no outstanding petition for a winding up order or administration application and an administrative ■ Cenargo International Plc—Finding receiver is not already in office; transatlantic harmony — Eligibility for • more than 12 months have passed since any previous non-US companies to file for Chapter 11 out of court appointment by the company ceased to have effect or any CVA moratorium under the new As details of the on-going Cenargo restructuring have become Schedule A1 IA 1986 (introduced by the Insolvency Act available, the case provides useful insight into the ability for 2000) came to an end without a voluntary arrangement non-US companies to file for protection under Chapter 11 of

2 the US Code, difficulties which can arise between This state of affairs indicated a breakdown in the comity conflicting jurisdictions and attempting to find harmony between the US and UK Courts which may often be taken for between the two. granted in large international . In due course, Cenargo, a freight and passenger ferry company, was both the New York Bankruptcy Judge made it clear that Lombard incorporated in and had its head office in England. Its and the proposed provisional liquidators should have consulted principal assets were shares in subsidiaries, which were mostly the New York Bankruptcy Court before taking any proceedings English companies. Cenargo had limited assets in the US. It in the UK, because the automatic stay under Chapter 11 had did not have commercial operations in the US but in June worldwide effect, pursuant to US private international law. 1998 had issued ship mortgage notes in respect of ships, under Therefore, so long as a non-US had sufficient an indenture governed by New York law. As security for this connection with the US, it could be expected to observe the note issue, it had pledged its shares in an Isle of Man subsidiary stay even outside the UK. Indeed, the steps taken by Lombard to a New York Bank as Trustee for note holders. In addition, were unusually bold, since creditors outside the US system often in the Autumn of 2002 it had opened US bank accounts which take the view that defying the automatic stay under Chapter 11 enabled funding of US advisers. by taking local action may precipitate contempt proceedings On 16 January 2003, Cenargo filed for protection against their own operations in the US. pursuant to Chapter 11 in the Southern District of New York, Nevertheless, the New York Bankruptcy Judge did accept in the hope that the automatic stay which arises upon the that the worldwide automatic stay does not exist in a vacuum, filing of a petition would have global effect, including in but is inextricably linked with a jurisprudence that defers to the UK and, it was subsequently suggested, to enable the foreign jurisdiction or foreign law if the request for deference directors to remain in control. It was argued that there was is properly made. He therefore lifted the automatic stay and property in the US, there was US jurisdiction and the the injunction in order to allow administration petitions to noteholders were familiar with Chapter 11. be presented in respect of Cenargo and certain subsidiaries Despite Cenargo and its subsidiaries being incorporated in the English Court. outside the US, all of its operations being conducted outside On 7 February, the provisional liquidators were appointed the US and the vast majority of its assets and the majority of joint administrators. They, in turn, were authorised to defend its creditors being outside the US, the New York Bankruptcy the contempt proceedings on behalf of the joint provisional Court made the relevant Order. The Judge considered the liquidators and to indemnify them in respect of those opening of US bank accounts to be “prudent planning” and proceedings. In lifting the automatic stay the New York that there was a valid jurisdictional basis for filing under Bankruptcy Court accepted that England was the most Chapter 11, partly on the basis that the shares pledged to the appropriate jurisdiction for the case and that there would have New York Bank represented assets within the US. to be a formal insolvency process in England. Lombard Initial Leasing Limited, a creditor of Cenargo Immediately upon their appointment in respect of most in England, presented winding up petitions on 28 January of the Cenargo group, the administrators took control of the 2003 and pending a full hearing, provisional liquidators were group’s assets in Europe. On the same day, along with certain appointed in respect of Cenargo and twelve of its bondholders, they presented a motion to the New York Court subsidiaries. Lombard was a lessor of ships to one of the for an Order suspending the Chapter 11 proceedings. Cenargo subsidiaries. It seems that the administrators were appointed in the At the time of their appointment, the provisional nick of time, since Cenargo’s creditors in continental Europe liquidators had obtained an injunction restraining the were not about to recognise any worldwide effect of the directors of Cenargo from taking any further steps in the automatic stay and one French creditor arrested one of Chapter 11 proceedings without the consent of the English Cenargo’s ships on 10 February. Nevertheless, the English Court, including any application to the New York Court that administration being a procedure recognised throughout the Lombard, or the provisional liquidators, were in contempt of EU pursuant to the European Regulation on insolvency Chapter 11 at that stage, and allowing the provisional proceedings (No. 1346(2000)), the administrators were able liquidators to seek dismissal of the Chapter 11 proceedings. to recover the vessel on the same day. Furthermore, pursuant Neither Lombard nor the provisional liquidators obtained to the European Regulation, two subsidiaries of Cenargo, leave of the New York Bankruptcy Court before making an Norse Irish Ferries Limited and Cenargo Navigation Limited, application for the appointment of provisional liquidators. were put into administration by the English Court even though On the same day, a Cenargo subsidiary which was not in they were registered outside the EU, in Hong Kong and the in England made an application to Isle of Man respectively. the New York Court to enforce the automatic stay under The Court was satisfied that following the decision in Brac Chapter 11 and for sanctions and damages against both Rent-a-Car (see April 2003 issue), it had jurisdiction to make Lombard and the provisional liquidators for contempt in administration orders on the basis that the centre of main violating the automatic stay. interest of each company was the UK. In the case of the Isle

3 of Man company, the Court was satisfied that the centre of • The Court considered that it retained jurisdiction over main interest was either in Northern Ireland or England, and the issue of fees of the various US advisers involved. It accordingly was in the UK for the purposes of registration. emphasised the importance of the relevant fees being So far as the Hong Kong company was concerned, although paid since, otherwise, advisers might prove to be slow it had no commercial operations in the UK, management to become involved in the future, which could operated from within the UK. This analysis of where jeopardise the whole rescue process. The US Court management took place (as opposed to where assets were would review the fees and the administrators would be located), in the context of an asset holding company, is required to make an application to the English Court consistent with the recitals to the European Regulation. seeking a direction that the fees be paid as an expense On 14 February 2003, the New York Bankruptcy Court of the administrations. considered three issues: On 14 April 2003, both the English and the US judges, • suspension of the Chapter 11 proceedings; together with numerous legal advisers, took part in a telephone • the contempt proceedings; and conference which facilitated a possible settlement to the • the fees of US advisers. transatlantic disputes in respect of Cenargo — contempt, comity These issues were dealt with as follows: and costs. The English judge considered the contempt • The Court suspended the Chapter 11 proceedings proceedings to be unhelpful and expressed the view that the pursuant to Section 305(a)(2) of the Bankruptcy Code extra-territoriality of Chapter 11 proceedings, including in by reason of the administrations in England. The Court particular the automatic stay, was considered to be intrusive in considered that the English proceedings were many jurisdictions. Although the US Bankruptcy judge pointed acceptable alternative proceedings under Section out that contempt was a matter of US law, the English judge 304(c) of the Bankruptcy Code and that suspension of considered the applications to be inappropriate in the context the Chapter 11 proceedings was unlikely to lead to any of a cross-border restructuring process. prejudice to US creditors. The order of distribution of On the same day, the administrators applied for directions assets would be substantially the same in the English in the English Court in relation to the question of the fees of proceedings as in the Chapter 11 proceedings and US advisers. The English Court decided that the US Court unsecured creditors in the US could adequately assert should decide quantum and the UK Court would then deal their rights in the English proceedings. It was also clear with priority. In the meantime, both Lombard and the former that the “centre of gravity” of the case was the UK and provisional liquidators lodged their submissions to the effect that any connection with the US was limited. It was that the US Court had no personal jurisdiction over them in therefore appropriate that the position of the Cenargo respect of the contempt proceedings. group should be handled under the auspices of the The decision of the New York Bankruptcy Court appears English Court. In an earlier Chapter 11 case, re Ionica to confirm that there is a very low jurisdictional hurdle for plc, in which the only connection between the English non-US companies to commence Chapter 11 proceedings. It Company and the US was an indenture under which a seems that with some forethought and planning, any non-US Trustee held certain pledged stock in the US and two company can commence Chapter 11 proceedings. US debt offerings, the Bankruptcy Court had dismissed However, the ultimate suspension of the Chapter 11 the Chapter 11 proceedings in favour of administration proceedings in this case has cleared the way for a restructuring in England. of the Cenargo group out of the UK. Factors such as the Chapter 11 proceedings in relation to non-UK “centre of gravity” of the Cenargo group, which was taken subsidiaries of Cenargo were not suspended, but the into account when examining the appropriate jurisdiction for automatic stay was lifted in order to allow the handling the restructuring, compare to the “centre of main administrators or creditors to commence rescue interest” test under the EU Regulation. proceedings in the relevant jurisdictions. Nevertheless, the Cenargo case highlights the need for • The Bankruptcy Court considered that it retained legal harmony, and indeed the UNCITRAL Model Law on jurisdiction in respect of the contempt proceedings, Cross Border Insolvency (adopted by UNCITRAL in 1997) but reserved its judgment. The Court stated that would most likely solve several of the relevant issues in the damages should not be awarded against the provisional Cenargo case. At present, the Insolvency Act 2000 enables liquidators given their efforts to harmonise the different the Government to adopt the Model Law with or without sets of proceedings. However, the Court considered that modifications by secondary legislation. an important matter of precedent was at stake and that Although the jurisdictional basis for Cenargo’s Chapter most of the conflict over jurisdiction could have been 11 filing was both challenged and criticised in England, the avoided if Lombard had applied to the Bankruptcy strategy at least had the effect of preventing the termination Court in the first place for permission to apply for of some of Cenargo’s key leases and preserving value for the provisional liquidation in the UK. benefit of creditors.

4 THE EUROPEAN REGULATION ON and French subsidiaries were carried out in the UK. INSOLVENCY PROCEEDINGS • All of the above factors should be taken into account, together with a range of factors in relation to the ■ Centre of main interest - jeux sans frontiers group’s specific administrative and management arrangements. In the case of Daisytek-ISA Limited [2003] BCC 562, German The decision of the English Court was based principally and French Courts refused to recognise administration orders on where the finance was arranged and where the contracts of the English Court. with key suppliers were negotiated and administered, rather The English company was a holding company for a than where the services to customers were performed. This European group of companies comprising 12 English approach differs to that taken in the Cenargo cases in respect companies, 3 German companies and 1 French company, of its Hong Kong and Isle of Man subsidiaries (see above), in which was a pan-European reseller and wholesale distributor which the English Court looked principally at where the of electronic office supplies. The group head office was in revenue producing trading activities conducted by Bradford, from which, to a large extent, all of the companies management occurred. were managed and controlled, supply contracts with major At present, therefore, the factors which should be taken suppliers were negotiated and guarantees of outstanding into account when identifying the centre of main interest have balances due from German or French subsidiaries were yet to be settled by the English Court. provided. Barely two weeks after the making of the administration The directors of the English company applied for orders in England, the French Court made an order for the administration orders in respect of substantially the whole redressement judiciaire of the French subsidiary. This French group, including the German and French subsidiaries. insolvency proceeding is only available as a main proceeding Meanwhile, directors of the German and French subsidiaries (and not a secondary proceeding) under the European applied to their respective national Courts for . Subsequently the German Court ordered the proceedings to be commenced there. commencement of insolvency proceedings in respect of two The English Court made the administration orders in of the German subsidiaries. respect of most of the group companies including the German It seems that both the German and French Courts and French subsidiaries on the following basis:- considered that the English Court had no jurisdiction in • Even though the registered offices of the German and respect of the German and French subsidiaries, being distinct French subsidiaries were in Germany and France legal entities. Although, logically, the German and French respectively, the evidence rebutted this presumption Courts ought to have concluded that the respective centres under Article 3(1) of the Regulation and showed that of main interest of the German and French subsidiaries were their respective centres of main interest were in the in Germany and France, this was apparently not at all clear. UK. As a result, there existed two sets of main proceedings in • When identifying the centre of main interest, the respect of the same companies which flew in ∏fe face of the English Court should consider both the scale and European Regulation which does not provide for competing importance of the interests administered from a sets of main proceedings. particular place and then compare these with the In any event, the proper course was for the German or interests administered from any other place in order French subsidiaries to appeal the English decision before the to determine which location is of primary importance. English Court rather than to make applications in their local • Recital 13 of the European Regulation refers to the courts. Indeed, on 4 September 2003, the French Court of place where the administers its interests on a Appeal, in delivering swingeing criticism of the first instance regular basis and is therefore ascertainable by third court, held that the English Court was perfectly correct in parties. This is a significant matter since, if there are to finding the centre of main interest to be in the UK and that be insolvency proceedings, creditors should know any party wishing to challenge such a decision must apply to where to contact the debtor and what legal risks they the appellate court in the country of that decision. Once might incur in dealing with the debtor. proceedings are opened in one jurisdiction it is too late to • For the purposes of Recital 13, the most important third overturn them outside the jurisdiction. A decision of the parties referred to are potential creditors and in the German Court is still awaited. case of trading companies, the most important groups Comment: of potential creditors were likely to be financiers and In several respects the European Regulation requires trade suppliers. In Daisytek, it appeared to the English clarification. It is particularly unhelpful that the Regulation Court that a large majority of creditors by value knew provides no definition of the centre of main interest and in that many of the important functions of the German multi-national groups, where there might be said to be

5 significant interests or operations in several jurisdictions, The Court observed that where a scheme is being problems will abound. Unless a centre of main interest can be proposed as an alternative to liquidation or administration, identified such that the appropriate place for main proceedings an analysis of how the respective creditors would have been is determined, one of the principal objectives of the Regulation treated in a liquidation or administration should be will be defeated. Furthermore, the Regulation is founded upon undertaken when determining the classes of creditors. This the principal of comity and information sharing between in turn may lead to the adoption of a robust, practical and insolvency office holders in member states. This will be economical, but not unfair, evaluation of claims. In addition, rendered extremely difficult if member state courts are unable the Court commented that a scheme may quite properly to be mutually consistent in these respects. exclude from a particular class, creditors or members that would otherwise fall within the class so long as any such exclusion was not arbitrary but bona fide and for appropriate commercial or other reasons.

■ Proper constitution of classes of creditors RECEIVERSHIP

In the case of Marconi Corporation plc and Marconi plc [2003] ■ Receiver owes duty of care on sale despite EWHC 663, the Court decided that the views of creditors on appointment of reputable agent the constitution of creditor classes should not be sought before a hearing to convene meetings of the scheme creditors. In Raja v Austin Gray (a firm) [2003] BPIR 725, the Court of For regulatory reasons, there was considerable urgency Appeal has confirmed the general principle that a receiver’s in convening scheme meetings in respect of Marconi and its equitable duties cannot be delegated and are not discharged wholly owned subsidiary pursuant to Section 425 of the by appointing a reputable agent. This judgment, on a point Companies Act 1985, which prevented the company from for which there existed no binding authority, extends to all giving notice to the creditors of the proposed scheme and agents appointed by receivers, including solicitors and valuers. the composition of the creditors meetings, ahead of the first Receivers will owe a duty to ensure that reasonable care is court hearing. taken by an agent in conducting a sale, and it will be An earlier practice statement entitled Schemes of incumbent upon receivers, not a mortgagor, to sue the agent Arrangements with Creditors [2002] 3 All ER 96, provides in the event of negligence. that it is the applicant’s responsibility to draw to the Court’s In this case, receivers had appointed a firm of valuers to attention, as soon as possible, any issue which might arise in carry out valuations of properties and to give advice in relation relation to the constitution of the creditors meetings or any to a potential sale. Whilst certain properties were subsequently other issues which might affect the conduct of the meetings. sold, the proceeds were not sufficient to settle the mortgagor’s The applicant should take all steps reasonably available to debts to the mortgagee. The mortgagor alleged that the notify any person affected by the proposed scheme of its properties had been sold at an undervalue and having settled purpose, the meetings of the creditors which will be required proceedings with both the receivers and the mortgagee, and their composition, unless there are good reasons commenced proceedings against the firm of valuers. otherwise. The Court held, among other things, that a receiver owes In this case, the Court held that while notice should be an equitable duty of care to a mortgagor who or which has an given to creditors before the first hearing, in accordance with interest in the equity of redemption (see Medforth v Blake the practice statement, unless there were good reasons for [2000] Ch. 86). The receivers were selling the properties not doing so, in practice time pressures will often prevent an themselves and therefore the mortgagor, as legal and adequate summary of the scheme and a description of the beneficial owner of the properties, had an interest in the constitution of the relevant classes, from being provided equity of redemption. before the first hearing. In the case of Marconi, the Court The receivers could not fulfil their duty of care by considered that there was a good reason for not circularising entrusting the sale to competent professionals (following creditors in advance of the application, which meant that while comments made in Cuckmere Brick Company v Mutual the Court could provide an initial view regarding the Finance [1971] Ch. 949). The duty of both the mortgagee constitution of classes, this would not prevent a creditor from and the receivers to sell at the best price reasonably obtainable raising an objection at the subsequent sanction hearing, even could not be delegated. If agent valuers acted negligently, though the practice statement required such a creditor to they placed both the mortgagee and the receivers in breach raise such objections at an earlier stage. of their equitable duties to the mortgagor.

6 LIQUIDATION was substantial, unless this was necessary in the context of the assignment. This had not been established and ■ Assessment of Provisional Liquidators’ therefore the amount claimed for secretarial services Fees was reduced pending justification; • payment on account should generally be limited to 2/ rds In Re Independent Insurance Company Limited (in provisional 3 of the amount estimated by the provisional liquidation) (No. 2) [2003] 1 BCLC 640, the Court fixed the liquidators. In this particular case, the pattern of time remuneration of joint provisional liquidators with the incurred justified an Order allowing the drawing on a 4 ths assistance of an assessor. monthly basis of /5 of the remuneration. The Order appointing the provisional liquidators did not The Court considered this to be an exceptional case, provide for the remuneration and therefore the provisional principally because of the size of the insolvency. Nevertheless, liquidators obtained an Order from the Registrar for it to be it has provided practical guidance in respect of appropriate fixed by reference to their firm’s hourly rates, subject to the and recoverable expenses. In addition, independent assessors fixing of such remuneration from time to time by the Court. may be used more often in future in relation to substantial The Registrar authorised payment in the first month of insolvencies. Furthermore, in the future, the insolvency of the provisional liquidation and the provisional liquidators gave insurance companies may be dealt with through an undertaking that they would apply to the Court on a three- administration, which provides for the appointment of a monthly basis in respect of subsequent remuneration in creditors’ committee and the fixing of the administrators’ accordance with Rule 4.30 IR 1986. The provisional liquidators remuneration by that committee. established an informal creditors’ committee to review their remuneration pursuant to Rules 4.127 to 4.131. As a preliminary issue, the Court was asked to consider DIRECTORS DISQUALIFICATION how it should fix the remuneration under Rule 4.30 and directed that an assessor should be appointed to assist the ■ Power to obtain documents for Court. The appointed assessor prepared reports in respect of disqualification proceedings the provisional liquidators’ remuneration and the Court was asked to consider these reports when fixing the same. In Re Pantmaenog Timber Co. Limited (in liquidation) [2003] 4 The Court considered that the appointment of an All ER 18, the House of Lords has overturned the Court of independent assessor had been successful in substantial Appeal, which had rendered office holders essentially matters, and issued the following guidance in relation to powerless when seeking to compel the production of remuneration of provisional liquidators: documents for the purposes of disqualification proceedings. • in respect of documentation, provisional liquidators are Their Lordships held that the could under a duty to adopt a proportionate approach which require documents from any person having information in balances the need to maintain the integrity of data (with relation to officers of a company in liquidation pursuant to the advantage of improving the prospect of recoveries) Section 236 IA 1986, for the sole purpose of obtaining which may flow from advanced document management evidence for use in disqualification proceedings against a systems, against the attendant costs; former director. In the leading judgment of Lord Millett, it • hourly rates of charge are normally set by reference to was considered that the only limitation implicit in Section a utilisation rate, to reflect the fact that not all work 236 IA 1986 was that it might be invoked only for the purpose can be charged. In large cases, a high utilisation rate of enabling the applicant to exercise his statutory functions could be expected and therefore discounted hourly in relation to the company which was being wound up. rates would be appropriate. However, the utilisation However, whether the applicant was the Official Receiver or rate was only one factor in assessing remuneration. the liquidator, or any other office holder, those functions Since the provisional liquidators’ hourly rates of charge included the provision of information to the Secretary of State were reasonable as against the size and complexity of or the Official Receiver which was relevant to the bringing or the assignment, no deduction was made, despite the continuing of disqualification proceedings. fact that no discount had been applied to reflect that His Lordship therefore rejected the assumption that the assignment was likely to achieve a utilisation rate Section 236 powers were conferred only for the better of more than 70%; discharge of the applicant’s functions in the winding up, as • the liquidators sought advice from tax experts and the confined to the recovery of the company’s assets and their hourly rates claimed for these services represented distribution. The functions included provision of market rates. Accordingly, the rates were justified; information to the Secretary of State for the purposes of • it was not appropriate to charge separately for disqualification proceedings. secretarial services on the basis that the time involved

7 FURTHER INFORMATION LAWYER CONTACTS

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