This month the new Insolvency Rules 2016 came into force, replacing the Insolvency Rules 1986. We cover this, and other issues affecting professionals in the insolvency and fraud investigation industry below.

The Supreme Court has held that the transfer of shares by a trustee, in breach of trust, is not a disposition for the purposes of section 127 of the Insolvency Act 1986 (IA 86, s.127). The disposal in question involved the transfer of the legal title to the asset, which was not an interest the company ever held. The company only had an equitable interest in the shares; it never held the legal title to them.


The case of Akers and others v Samba Financial Group (2017) involved a dispute over shares owned by an individual (the Individual) in five Saudi Arabian banks worth over US $300 million. The Individual had agreed to hold the shares on trust for Said Investments Co Limited (SICL) as a result of six transactions. He transferred the 'beneficial interest' in the shares to SICL but continued to hold the legal title so as to comply with legal requirements in Saudi Arabia.

The transactions were all governed by Cayman Islands law. However, the situs or location of the shares, and any equitable interest in them, was the jurisdiction where the company is incorporated or the shares are registered, which in this case was Saudi Arabia. The law of Saudi Arabia does not recognise trusts or the division between legal and equitable proprietary interests.

In July 2009, SICL went into liquidation in the Cayman Islands. In September 2009 the Individual transferred the shares to Samba Financial Group (Samba), to discharge personal liabilities owed by him to Samba.

The Cross Border Insolvency Regulations 2006 (CBI Regs) provide for the courts of England and Wales to recognise foreign insolvency proceedings and to provide assistance in such proceedings. Under the CBI Regs, the Chancery Court recognised SICL's winding up in the Cayman Islands and SICL together with its liquidators, issued proceedings against Samba, arguing (amongst other things) that the transfer was a void disposition under IA 86, s.127.

Samba applied for the claim to be stayed on the grounds of 'forum non conveniens', alleging that it was more appropriate for the Saudi Arabian court to hear the dispute.

First Instance & Court of Appeal decisions

The Chancery Court held that the trusts in question were governed by Saudi Arabian law. Furthermore even in trusts governed by the law of the Cayman Islands under the Hague Convention on the Law Applicable to Trusts and on their Recognition (the Trusts Convention), transfers of property were a matter for the 'lex situs' (the law of the place where the property was situated when the transfer occurred). As the lex situs in this case was Saudi Arabia and Saudi Arabian law did not recognise equitable proprietary trusts and, as a result, the English proceedings were bound to fail. The stay was therefore granted.

SICL and its liquidators appealed to the Court of Appeal. The Court of Appeal was unable to decide whether Saudi Arabian law applied as a result of the Trusts Convention. They held that the issue would need to be properly addressed at trial. The appeal was allowed and the stay was lifted.

Supreme Court decision

The Supreme Court acknowledged that the earlier decisions had focused on whether SICL had equitable proprietary interests in the shares. In light of submissions made, it did not really matter whether the Trusts Convention applied or whether SICL had any proprietary interests in the shares. The question was whether there had been any disposition of property under IA86, s127.

The Supreme Court held that IA86, s.127 addresses cases where assets legally owned by a company in winding up are disposed of, and provides a means for those assets to be recovered by treating the disposition as void.

The disposal by the Individual of his legal interest in the shares involved a breach of trust but it did not involve any disposition of SICL's property. SICL's property, in the form of an equitable proprietary interest or personal rights to have the shares held for its benefit, continued despite the disposal of the legal title. The equitable interest would continue unless or until disposal.

If the disposal did override SICL's interest it would be because SICL's interest was always limited in this respect not because its interest had been disposed of.

The appeal was allowed. There is no disposition of an equitable interest within IA 86, s127 when there is a transfer by a legal owner of the legal estate, which is subject to that equitable interest, to a bona fide purchaser for value without notice of that equitable interest. There was therefore no disposition of any rights of SICL in relation to the shares and their transfer to Samba.

The court held that there was no basis to extend IA 86, s.127 to cover three party situations where legal title is held and disposed of to a third party by a trustee and the beneficiary's beneficial interest either survives or is overridden. The law already regulates, protects and circumscribes beneficial interests under a trust and such protection is separate from and outside the scope of the provision.

What does this mean for IPs?

While IA 86, s. 127 does provide significant creditor protection against the disposition of property once a company is insolvent, IPs should take note and be mindful of the fact that it does not provide the same protection in respect of a beneficial interest unlawfully disposed of by a trustee.

It will also be crucial to determine the "lex situs" as this will also determine whether valid title is obtained or not on disposition.

Guidance given on fixed fees for placing companies into creditors' voluntary liquidation

The Chancery Court has provided guidance on the assessment of fixed fees agreed before any work is carried out. Any assessment should be based on the reasonableness of the fee agreed, not on the time actually spent when the work was undertaken.


The case of David Rubin & Partners v (1) Malcolm Cohen, (2) Shane Crooks (2017) involved a preliminary issues hearing, seeking an application for the court's direction as to whether the Applicant should be paid from funds held in its client account. The Applicant was seeking payment of the fixed sum agreed with 1,796 companies (the Companies) for work carried out to enable each company to be placed into creditors' voluntary liquidation.

The Applicant was retained to produce statements of affairs and to summon, advertise and hold meetings of members and creditors in consideration of payment by each of the Companies of £6000, or the sum equal to its maximum available realisable assets (whichever was the lower).

Just over £2.88 million was transferred to the Applicant by the Companies and was held in its client account. The Companies had no other assets. The Applicant was seeking payment of just over £2.87 million, working out at an average fee of about £1600 per company. If the Applicant received that sum, there would be nothing left for creditors of the Companies.

The Applicant argued that they had agreed a reasonable fixed fee for work that had to be completed. The fact that if it received the fee claimed there would be nothing left for creditors - or the costs and expenses of the liquidation - was simply attributable to the Companies' financial position. The Applicant argued that the funds were held on trust for it or they were subject to a lien or other equitable interest.

The Respondents (the liquidators of the Companies) argued that the court had the jurisdiction to assess the fee agreed under the Insolvency Rules 1986 (IR). The fee was unreasonable and the work was unnecessary as an alternative insolvency procedure should have been used. In any event, priority should be given to payment of the liquidation expenses, and that no trust existed.

Determination of the preliminary issues

Under s.115 of the IA 86 and IR 4.38 and 4.62, expenses incurred in a winding up should only be paid out of a company's assets if they were reasonable and necessary. This includes pre-liquidation expenses incurred for the purposes of achieving a creditors' voluntary winding up. The court therefore had jurisdiction to assess whether expenses had been reasonably and necessarily incurred.

IR 4.218 lists the expenses that are to be treated as expenses of the winding up and the order of their priority for payment. IR 4.218(3)(k) identifies an expense as any amount payable to a person employed to assist in the preparation of a statement of affairs or of accounts. IR 4.218(3)(m) confirms that 'an expense' will include any necessary disbursements incurred by the liquidator in the course of his administration. IR 4.218(3)(k) gives priority to the costs and expenses of a statement of affairs.

To the extent that 4.218(3)(k) did not apply to the fees claimed by the Applicant, r.4.218(3)(m) would apply instead.

The court found that the funds were held by the Applicant on trust for the Companies and that there was no trust or security in favour of the Applicant. There was no contract to that effect and on the evidence before the court there was no intention to create a trust or grant security by the Companies. In any event, any agreement creating a trust or granting security would be an attempt to vary the statutory requirements and would therefore be contrary to public policy and void.

There was no suggestion that a fixed fee was an inappropriate basis upon which to determine the remuneration to be paid to the Applicant. Any assessment should therefore be of the reasonableness of the necessary work at the time the fixed fee was agreed, and that assessment should not change as a result of the time it actually takes to do the work or how the service is used.

Actual performance is not the basis upon which the fee was agreed and it should not therefore be the basis for assessment. The fixed fee will need to be assessed on the basis of;

  • The work agreed to be undertaken;
  • Whether that work was necessary taking into account the factual circumstances at the time; and
  • In respect of the necessary work, what was a reasonable fixed fee.

The court held that the question as to whether an alternative insolvency procedure should have been adopted was not a question to be decided as a preliminary issue. That question would need to be addressed at the assessment hearing.

What does this mean?

This case provides a useful summary of the guidelines that should be used to assess the reasonableness of a fixed fee. There is no doubt that assessment of a fixed fee must be based on the reasonableness of the fee at the time the fee was agreed, and not on the work that was subsequently required to be carried out.

New Insolvency Rules in force from 6 April 2017 - are you up to date?

Readers will be aware that the Insolvency (England & Wales) Rules 2016 (IR 2016) came into force on 6 April 2017, replacing the Insolvency Rules 1986 (IR 86) subject only to some minor transitional provisions. The IR 2016 consolidate the many amendments made over the years to the IR 86 and will give effect to changes brought about by more recent legislation, including the Small Business, Enterprise and Employment Act 2015.

As a reminder, some of the key changes from the IR 86 include:

Structural and formatting changes

  • There are no longer any statutory forms; the previous forms are replaced with rules detailing what must be included in the various prescribed notices and documents.
  • Rules relating to the different formal insolvency processes are now grouped together to avoid repetition.

Decision making

  • Creditors' meetings will no longer be the default mechanism for decision making, insolvency office-holders (IPs) can instead obtain a decision by a 'qualifying decision procedure' or a 'creditor decision procedure'. These "decision procedures" include correspondence, electronic voting, virtual meetings and physical meetings (the latter only if requested by the minimum number of creditors or contributories).
  • IPs can also obtain a decision by deemed consent, whereby the IP notifies creditors of the proposed decision and it is deemed approved unless more that 10% of the creditors (by value) - or contributories - object to the decision.
  • There can be no deemed consent where a prescribed decision procedure is required by statute or a court order.


  • Creditors are able to opt out of receiving correspondence from the IP unless it relates to the payment of dividends or the rules require notice to be given to all creditors.
  • The IP can simply notify creditors that a website will be used to host the insolvency documents; a court order will no longer be needed.
  • If creditors have been corresponding electronically with the IP, the IP can send out documents in electronic format without the need to obtain written consent.


  • There is no longer a time restriction for meetings.
  • Meetings for companies in creditors' voluntary liquidation will now be chaired by an appointed person rather than by the IP.
  • There is no longer a requirement to hold final creditor / member meetings.


  • The resignation process is simplified, as it is no longer necessary for a liquidator or trustee to call a meeting to confirm their resignation before the insolvency process has been completed.
  • An IP's resignation will be effective 21 days after notice is given - it will no longer be effective immediately on the filing of the relevant notice.


  • Creditor claims of less than £1000 can be admitted without a proof of debt or evidence supporting the debt being lodged.

Trustee in Bankruptcy

An official receiver will automatically be appointed as the trustee in bankruptcy when a bankruptcy order is made, thereby removing the delay between an order being made and the automatic vesting of property in a trustee.