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Insolvency Intelligence 1994 Case Comment Application of Insolvency Act 1986 to foreign company Subject: Administration of justice. Other related subjects: Civil procedure. Company law. Insolvency Keywords: Choice of law; Corporate insolvency; Foreign companies; Jurisdiction (1993) The Times, 11 August FACTS The Bank of Credit and Commerce International (Overseas) Ltd was incorporated in the Cayman Islands, where it was put into compulsory liquidation. The Grand Court of the Cayman Islands sought assistance from the English High Court under s 426 of the Insolvency Act 1986. It asked the High Court to make declarations under various sections of the Act, namely s 212 (orders against directors for misfeasance), s 213 (fraudulent trading) and s 214 (wrongful trading) and s 238 (transactions at an undervalue). The company had never been registered as an oversea company in the United Kingdom. The High Court therefore had to decide, as a preliminary matter, whether it had jurisdiction to make the orders requested by the Grand Court of the Cayman Islands. HELD Section 426 empowers English courts, when asked to co-operate with an insolvency court overseas, to apply either English insolvency law or the law of the court making the request. Rattee J held that this allowed the court to apply English law relating to substantive questions which might arise in the insolvency and not simply the law relating to procedural matters. It had been objected that this would expose directors of foreign companies to potential liabilities under English law for activities which were perfectly lawful under the law under which the company was incorporated. This objection lost much of its force when it was remembered that such potential liabilities would only arise if the foreign court exercised its discretion to ask the English courts to apply English law and the English court exercised its discretion in favour of doing so. He therefore considered the Grand Court of the Cayman Islandshttp://www.ukassignment.org/ should be given the assistance it requested. COMMENT In principle, this judgment decides that the English courts can apply any relevant part of the Insolvency Act 1986 (and, presumably, the Insolvency Rules 1986) in response to a foreign court's request for assistance under s 426. Whether or not fraudulent trading etc has occurred in this case is a matter to be decided at a future hearing. Insolv. Int. 1994, 7(3), 21 © 2008 Sweet & Maxwell Ltd and its Contributors
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