Vol 8 (2011) - Issue 3

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Receivership of Foreign-based Companies: Scottish Government Acts

Introduction

In the autumn of last year the Scottish Government issued a consultation paper regarding the scope of receivership in Scotland. This article follows up an article published in relation to that consultation in 2010 International Corporate Rescue 289.

The Scottish Government consultation related, in particular, to concerns regarding the linkage of receivership under Scots law to jurisdiction of the Scottish courts to wind a company up – and the restriction of that winding up jurisdiction following the coming into force in May 2002 of the European insolvency regulation (Council Regulation (EC) No. 1346/2000, the 'EUIR'). The concern was expressed that, for example, it ceased to be possible from May 2002 to appoint a receiver in Scotland in relation to the Scottish assets of an Irish-based investment company with no 'establishment' (for the purposes of the EUIR) in Scotland – when the changes introduced by the EUIR were only intended to restrict winding up and administration in Scotland in these circumstances.

Taking account of responses received to its consultation, the Scottish Government has reformed the law here, through the Insolvency Act 1986 Amendment (Appointment of Receivers) (Scotland) Regulations 2011 (SSI 2011/140, the 'Amendment Regulations'), which came into force from 17 March 2011. The Amendment Regulations amend section 51 of the Insolvency Act 1986 ('Section 51') in order to permit a receiver to be appointed to property situated in Scotland of a company which the Scottish courts cannot wind up, but relative to which another EU member state has jurisdiction to open insolvency proceedings under the EUIR (a 'Non-UK EU-based Company').



Section 51

Section 51(1) has been amended by the Regulations to read as follows:

'It is competent under the law of Scotland for the holder of a floating charge over all or any part of the property (including uncalled capital), which may from time to time be comprised in the property and undertaking of an incorporated company (whether a company registered under the Companies Act 2006 or not)

(a) which the Court of Session has jurisdiction to wind up; or

(b) where paragraph (a) does not apply, in respect of which a court of a member state other than the United Kingdom has under the EU Regulation jurisdiction to open insolvency proceedings,

to appoint a receiver to such part of the property of the company as is subject to the charge.'

The Amendment Regulations inserted paragraph (b) into section 51(1), along with cross-definition of 'court' and 'insolvency proceedings' in paragraph (b) to the EUIR.

Property situated in Scotland

Following the suggestion of some respondents to the Scottish Government consultation, the Amendment Regulations also insert the following new subsection (2ZA) into section 51:

'But, in relation to a company mentioned in subsection (1)(b), a receiver may be appointed … only in respect of property situated in Scotland.'
Accordingly, it has been possible from 17 March to appoint a receiver under Scots law in relation to the property situated in Scotland of the Irish-based investment company mentioned above under a floating charge granted by that company.