Facts
Videology Inc and it's UK subsidiary, Videology Limited (the "Company") applied to the English court for their US Chapter 11 proceedings to be recognised as "foreign main proceedings" under Article 17 of the UNCITRAL Model Law of Cross-Border Insolvency (the "Model Law") and for an administration moratorium under the Article 21 of the Model Law. The Videology group had secured an agreement with an interested party to buy its business and assets.
Decision
Despite arguing that the Company's centre of main interests ("COMI") was in the US, the judge decided it was in the UK. As a result the US proceedings were held to be "foreign non-main proceedings".
Recognition of the US proceedings as "foreign non-main proceedings" does not bring about an automatic stay on individual actions in the UK. The judge held that there must be very good reasons to prohibit creditors of a company with its COMI in the UK from seeking to commence main insolvency proceedings in the UK.
The judge decided there would be clear benefits for all creditors of the Company if the planned asset sale proceeded, which required the court to grant a stay on actions in the UK:
- The planned sale of the business was expected to result in realisations to the creditors of the Company of £0.07 per £1;
- a stand-alone liquidation or administration of the Company was expected to result in realisations of only £0.01 per £1; and
- protection for creditors would be achieved for example through the presence of unsecured creditors on the Chapter 11 creditors' committee.
On this basis the court granted an administration moratorium under Article 21 of the Model Law in respect of the "foreign non-main proceedings".
Comment
This is the first time a court has granted an administration moratorium in respect of "foreign non-main proceedings" As notable, though, is the flexibility of the English courts in using the Model Law to ensure that the position of creditors of a UK company is protected by assisting the process of a Chapter 11 sale rather than allowing those creditors to pursue UK insolvency proceedings.
Re Videology Ltd [2018] EWHC 2186 (Ch)
