Key Point

Judgement provides detailed guidance on administrators making distributions in relation to EU incorporated companies.

The Facts

The worldwide Nortel Group operated a networking solutions and telecommunications business across multiple jurisdictions. In January 2009 those entities of the Nortel Group whose Centre of Main Interest was adjudged as being in the United Kingdom were placed into Administration in the UK. The administrators applied to the court for orders in respect of distributions to be made to unsecured non-preferential creditors and to promulgate company voluntary arrangements in respect of various of the companies in the group.

The Decision

A proof of debt process and a distribution is not an automatic feature of every administration in England. In determining whether to make the orders sought, the court considered whether the proposed distribution was conducive to the current objectives of the administration; whether any such distribution was in the interests of the company’s creditors as a whole; whether proper provision had been made for the company’s secured and preferential creditors; and what the realistic alternatives to the proposed distributions were. Applying these principals the Judge considered it appropriate to make the order pursuant to para 65(3) and, in the interests of instituting a fair and efficient procedure for the creditors to file their claims, for notice to be given in accordance with Rule 2.95(4) stipulating the last date for proving. In addition, the court ordered that the administrators be at liberty to promulgate CVAs in relation to various companies within the group.

Comment

This is the first time the UK courts have provided comprehensive guidance in relation to distributions in the administration of non-UK companies.

Re Nortel Networks UK Ltd and others