A recent seminar hosted by Solomon
Harris on 12 August featured leading English insolvency Q.C. Richard Snowden
from Erskine Chambers, London.
Speaking to more than 40 leading
insolvency professionals, members of CIMA and corporate service providers, Mr.
Snowden joined Solomon Harris’ head of insolvency, restructuring and dispute
resolution, Laura Hatfield, and the firm’s head of funds, Paul Scrivener.
Mr. Snowden has been involved in
well-known insolvency cases such as Maxwell, Barings and BCCI, and now Lehman,
as well as various less well- publicised seminal insolvency cases.
He led off the event with a
discussion of the two tests for insolvency under English law, and the recent
examination of one of the tests by the Lord Chancellor in the case of BNY Corporate
Trustee Services Ltd v Eurosail-UK. In that case, Mr. Snowden’s arguments as to
the application of the test were accepted.
Cayman law v English law
Ms Hatfield then compared the
insolvency test under Cayman Law to those under English law, arguing that the
Cayman Law test is much narrower and limited to cash flow only, with no balance
sheet aspect. This position may be surprising, not to say concerning, to some involved
in insolvency work in Cayman, she indicated.
Mr. Snowden then commented on the Cayman test and, from his perspective
as a member of the English Insolvency Rules Committee, issues of legislative
drafting and interpretation applicable to the Cayman test.
Mr. Scrivener then launched the
debate on the statutory power given to a Cayman company to exclude, through
contract, the right of creditors and shareholders to liquidate the company.
There is no apparent statutory limit on the power, so potentially a creditor
could be contractually excluded from seeking to liquidate a company even though
it is insolvent because it can’t pay its debts.
Mr. Snowden explained that such a
provision does not exist in English law and again speculated on the drafting
and interpretation process for the statute. After the main discussions, the
audience raised comments and questions on whether such a provision might not be
enforceable as a matter of policy if there was fraud involved, a distinction
between solvent and insolvent liquidations, and how market forces may make such