On 16 April 2014 we assisted J.K. Buckenham Limited (JKB) in successfully obtaining the court’s leave to convene a meeting of its creditors, a meeting at which JKB will ask such creditors to consider and to vote on a scheme of arrangement under the Companies Act 2006 (the Scheme). JKB is promoting the Scheme as part of a wider solution to end its broking obligations, release trapped cash, relinquish its FCA permissions, and ultimately liquidate.

THE SCHEME

JKB is a wholly-owned subsidiary of Hyperion Insurance Group Limited (Hyperion). JKB went into run-off in 2006 and all of its ongoing business now resides with its sister company, Howden Insurance Brokers Limited (Howden). However, even though Howden services JKB’s clients and former clients in practice, JKB retains the legal liability to provide such services to those clients. If it becomes effective the Scheme will terminate the agreements under which JKB owes such ongoing broking obligations. Under the Scheme Howden will provide replacement broking agreements to those clients (i.e. creditors) who so elect.

CREDIT WRITE-BACK

In tandem with the Scheme, JKB will ask creditors to submit claims (supported by evidence) of ownership of the funds held by JKB in its client trust account. Following a successful implementation of the Scheme, JKB would seek to return such funds to creditors. JKB would then effect a credit write-back of the balance of funds and return such funds to Hyperion by way of dividend. Hyperion would indemnify JKB to protect any creditor which may later claim against JKB for any funds.

DE-AUTHORISATION AND LIQUIDATION

Once stripped of its assets and liabilities, JKB would finally seek to cancel its regulatory permissions and to liquidate. The Hyperion indemnity will afford creditors third party enforcement rights which survive such liquidation.

CONCLUSION

We believe that the broker scheme could form the basis of a tool which the broking industry can use to not only legitimately perform credit write-backs with the blessing of the FCA, but also to rid itself of ongoing obligations and regulatory supervision for its legacy brokers. For more information on the Scheme and to monitor its progress please go to www.jkb.co.uk.