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Creditor protection enhanced in the Commercial Court
16th September 2009
Creditor protection enhanced in the Commercial Court
Scottish Lion Insurance Company [2009] CSOH 127
In a landmark judgment in the Commercial Court, Lord Glennie has removed the pressure felt by some creditors that there was no alternative but to accept the views of others. James McNeill QC and Ampersand's Jane Munro acted for the successful Opposing Creditors.
In recent years there have been a number of applications by apparently solvent insurance companies to be allowed to wind up their business by way of a Companies Act Scheme of Arrangement. There was a previous application by Scottish Lion in 2005, and applications in England in BAIC and Sovereign. No opposed application has yet been granted in the face of opposition, but the 2008 Scottish Lion application was another where creditors’ meetings had taken place and the voting values appraised by the Scheme’s Independent Voting Assessor.
In both BAIC and Sovereign concerns had been expressed as to the valuation methodologies, but in the 2008 Scottish Lion application the Opposing Creditors took the bold step of arguing at an early stage that, in solvent schemes, creditors who wished to retain their insurance contracts should not be forced to commute them through an uncertain valuation methodology. The Company could agree with Creditors who wished to commute without the need for a Companies Act Scheme; but the fact that there were willing creditors should not force others to give up their otherwise valuable – and in cases irreplaceable – contracts of insurance.
Lord Glennie took the view that, whilst creditor democracy was an important tool where there were real problems for the creditors of the relevant company, where the company was solvent, there had to be particular justification for binding unwilling creditors to a scheme forcing them to give up their insurance contracts.
Ampersand's Robert Howie QC acted for the Petitioners.
The full judgment of Lord Glennie can be viewed by clicking here.
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