The High Court has refused a challenge by a liquidator to an invoice discounting agreement entered into by the Company prior to liquidation.
The liquidator argued that the invoice discounting agreement was in fact a loan agreement under which the Bank took a charge over the Company’s book debts. If that was the case, then those funds would be funds in the liquidation and the Bank an unsecured creditor, because the loan agreement was not registered and therefore void as against the liquidator.
The Court held that the invoice discounting agreement was clearly a debt purchase agreement, which involved the sale and purchase of the Company’s book debts. Therefore, those debts were not Company assets, and as such were not captured by the liquidation.
Click here to view the Judgement.
This is an important decision, and one which re-enforces the position of providers of invoice discounting facilities.