Restructuring

Co-Contributor: Sally Willcock

CROSS-BORDER UPDATE

UK’s Supreme Court rules it a question of judgment and steers a U–turn from ‘Point of No Return’ analysis
UK’s Supreme Court has this week considered the application of the balance sheet test for insolvency in BNY Corporate Trustee Services Limited v Eurosail and others [2013] UKSC 28.  The decision is one of major and widespread significance. This is the first time that UK’s highest court has had to interpret the balance sheet test at S123(2) of the Insolvency Act 1986.  In doing so, the Supreme Court has also provided helpful confirmation of the correct approach to the interpretation of the cash-flow test for insolvency at S123(1)(e).
The Supreme Court agreed with the conclusions of the High Court and the Court of Appeal that Eurosail, a special purpose securitisation vehicle which had issued loan notes by way of financing, was not balance sheet insolvent, but it did so based in part on slightly different reasoning from the lower courts.
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