In his latest Coffee Break Briefing, Insolvency expert Malcolm Niekirk looks at the challenges that can arise when an insolvency case has an international element.
From property and businesses based overseas to dealing with foreign lawyers, Malcolm explains some of the practical issues insolvency practitioners may need to consider when assets, companies or other parties are located outside England and Wales.
In case you missed it, you can read a summary and watch the video here.
What do we mean by ‘foreign’?
In this context, ‘foreign’ generally means something situated outside, originating from, or connected with a country other than our own.
Dealing with an overseas element can create additional complications. The law may be different, there may be a language barrier, and translations may not always capture the precise meaning of legal terminology. Distance can also make matters more difficult, while local procedures and ways of working may differ considerably from those in England and Wales.
Perhaps most importantly, an overseas authority or professional may not automatically recognise your appointment or the powers that come with it.
What is foreign property?
Foreign property can arise in insolvency cases in a number of ways. For example:
- A bankrupt may own all or part of a property overseas.
- A company may own a villa, factory or other premises abroad.
- A company may own an overseas patent or trade mark.
As a general rule, the law of the country in which the property is located will determine how that property can be dealt with.
Moveable property can be more complicated. This might include assets such as aircraft or ships, which will often be subject to their own registration requirements and legal regimes.
Under the Insolvency Act 1986, an office-holder may have authority to take possession of and sell property. However, those statutory powers do not automatically operate in every overseas jurisdiction.
If an asset is located abroad, you may therefore need to establish that you are properly appointed as a trustee, liquidator or administrator, explain what that role means and demonstrate that your powers are recognised under the local law.
Typically, this may involve providing:
- Your appointment documents.
- Translations of those documents.
- An explanation of the relevant rights and powers you have.
- Evidence that those rights are recognised under the local law.
What about foreign businesses?
An insolvent business may also have wider international connections.
It could have overseas premises, whether rented or owned outright, as well as employees working under foreign employment contracts and employment laws. It may also have contracts governed by foreign law, overseas suppliers or contractors, foreign creditors and other assets outside England and Wales.
As with foreign property, one of the first challenges is establishing your authority to act.
You may need to produce your appointment documents, arrange for them to be translated and explain the rights and powers that come with your appointment. You will then need to establish whether, and to what extent, those powers are recognised in the relevant jurisdiction.
Importantly, proving that you have authority to act does not necessarily mean that you will receive all of the statutory protections or privileges that would apply in England and Wales.
For example, overseas creditors may still be able to take action against the company, assets may be repossessed and employees may benefit from rights available under local employment law.
Foreign companies and overseas insolvencies
It is also important to distinguish between a foreign company and a foreign business.
A foreign company is a company that has been legally incorporated in another country or state. A foreign business is a broader term and can include any business operating outside its home jurisdiction, including companies, sole traders, partnerships and trusts.
A foreign company may still own property or operate a business in England and Wales.
Depending on the circumstances, it may be possible to deal with that company through an Insolvency Act 1986 procedure, such as liquidation or administration. Whether this is possible will depend on the company’s connection with England and Wales, including matters such as its centre of main interests, or COMI.
Alternatively, it may be appropriate or necessary to take an appointment overseas, depending on the insolvency law of the relevant jurisdiction.
What if a foreign company owns property in England or Wales?
Another issue can arise where an overseas company owns land in England or Wales but has not complied with its disclosure obligations.
In some circumstances, a restriction may be placed on the title at HM Land Registry, which can prevent the property from being sold in the usual way.
If you are appointed as liquidator of that company, your options may include:
- Applying for the company to be registered, although this may be expensive or difficult.
- Applying to court for authority to sell the property.
- Asking an existing mortgagee to exercise its power of sale.
- Considering whether the property should be disclaimed.
The most appropriate route will depend on the circumstances of the company, the property and the insolvency appointment.
Working with foreign lawyers
Where an insolvency has an overseas element, it is often necessary to instruct lawyers or other professionals in the relevant jurisdiction.
You may need their help with:
- Advice on local law.
- Transactions involving overseas property or businesses.
- Litigation or other court proceedings.
Finding the right adviser is therefore important.
Previous experience and recommendations can be useful, as can professional directories, regulatory registers and online research.
When choosing a foreign lawyer, it can be helpful to look for someone with strong written and spoken English, particularly where there will be detailed legal correspondence.
Dual qualifications can also be valuable, as the adviser may have a better understanding of English legal terminology and concepts as well as the local law in their own jurisdiction. Their location and ability to deal practically with the matter should also be considered.
Once you have identified the right adviser, clear instructions are essential. Explain exactly what you need them to do, provide the relevant background and documents, and consider asking for a fixed fee or clear estimate at the outset.
The key point
An international element can add a further layer of complexity to an insolvency case.
Having authority to act under English law does not necessarily mean that the same authority will automatically be recognised overseas. Understanding the local legal position, establishing your appointment and working with suitable advisers can therefore be crucial when dealing with foreign assets, businesses or companies.
Insolvency Coffee Break Briefings
Thank you for reading the summary for this Coffee Break Briefing. You can watch the full, detailed webinar here. If you have any questions after reading this article, please don’t hesitate to get in touch with our bright and experienced team. Call us on 01202 499255, or fill out the form at the top of this page, for a free initial chat.
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