Eurodis Electron Plc & Ors, Re The Insolvency Act 1986

The Insolvency Regulation does not permit a court in one Member State to treat orders made by a court in another Member State as nullities. An order remains valid, and its consequences under the law of the state making it must be respected, until set aside by that state’s courts. The statutory power to wind up a dissolved foreign company, and the resulting pragmatic treatment of that company as continuing to exist for the winding-up, does not justify deeming the company to continue for the purposes of an administration. That implication is supported by express statutory provisions governing winding-up, but no equivalent provision applies to administration. Where an administration has become ineffective following dissolution abroad, the court may instead make a winding-up order and provide for proper administration expenses to be paid from the liquidation estate.

The applicants were administrators of Eurodis Texim Electronics SA, a Belgian company subject to English main insolvency proceedings because its centre of main interests was in England. Belgian proceedings were subsequently opened without being treated as secondary proceedings. The Belgian bankruptcy was later closed, producing the company’s automatic dissolution under Belgian law.

The administrators sought a declaration that the English administration continued despite the dissolution. Alternatively, they sought a winding-up order, their appointment as liquidators, and directions that the administration’s outstanding remuneration and expenses be paid as expenses of the liquidation. The central issues were whether the English court could disregard the Belgian orders or deem the dissolved company to continue for administration purposes, and whether the alternative winding-up relief was available.

1. The application to continue the administration was refused. The ordinary private international law rule is that the law of the state of incorporation determines whether a company has been dissolved, as illustrated by Lazard Bros v Midland Bank [1933] AC 289.
2. The Insolvency Regulation requires mutual recognition of insolvency judgments. It does not empower one Member State’s court to declare another Member State’s orders invalid or to treat them as though they had never been made. The Belgian winding-up and discharge orders therefore remained valid until set aside in Belgium, and their consequences under Belgian law, including dissolution, had to be respected.
3. The statutory scheme for winding up a dissolved foreign company is materially different. Sections 221(5)(a) and 225(1) of the Insolvency Act 1986 expressly permit such a company to be wound up. Those words justify the implication that, for the limited purposes of the winding-up, the company is treated as continuing in existence, following Russian and English Bank v Baring Bros & Co Ltd [1936] AC 405.
4. No equivalent express provision supports a similar implication for an administration. The court declined to extend the winding-up fiction to an administration merely because dissolution abroad created practical difficulties. The Regulation instead envisages applications in the relevant Member State to prevent or reverse an improper dissolution.
5. The alternative relief was granted. The conditions for winding up the dissolved foreign company under section 221(5)(a) were satisfied. The administrators were appointed as liquidators, advertisement was dispensed with, and the outstanding administration remuneration and expenses were ordered to be paid as expenses of the liquidation, applying the jurisdiction recognised in In re Associated Travel Ltd [1978] 1 WLR 547.