Strand Capital Ltd, Re The Investment Bank Special Administration Regulations 2011

On an application to approve a client-asset distribution plan under the investment-bank special administration regime, the court must consider whether the statutory notification requirements have been met and whether the plan provides a fair, reasonable and efficient means of returning client assets as soon as reasonably practicable.

Where relevant persons have had a proper opportunity to make representations, the creditors’ committee has approved the plan, and the proposed allocation of Objective 1 costs is fair, the court will generally be slow to withhold approval or substitute its own assessment for that of those affected. The court need only require relinquishment of control over client assets; a physical transfer of cash is not necessarily required.

The administrators of Strand Capital Limited, an investment bank in special administration, applied for approval of a distribution plan for client assets with an indicative aggregate value of approximately £248 million.

The application concerned Objective 1 under the Investment Bank Special Administration Regulations 2011: returning client assets as soon as reasonably practicable. The court considered the statutory notification process, the creditors’ committee’s unanimous approval, the absence of client objections, and the proposed capped allocation of Objective 1 expenses between client accounts.

The central questions were whether the plan satisfied the statutory requirements and whether its method of allocating costs and returning assets was fair.

1. Approval framework. The application was governed by Chapter 3 of Part 5 of the Investment Bank Special Administration (England and Wales) Rules 2011. Under Rule 146(5), the court could approve the plan, dismiss the application, adjourn the hearing, or make another appropriate order. The court had to consider the required notifications and, where applicable, the creditors’ committee’s approval or opportunity to explain its position.
2. Approach to approval. Adopting the approach identified in Hume Capital Securities Plc [2015] EWHC 3717 and applied in Beaufort Asset Clearing Services Limited [2018] EWHC 2287, the court treated the proper opportunity for affected persons to make representations, their agreement or absence of objection, and creditors’ committee approval as important considerations. In those circumstances, the court should be slow to withhold approval or replace the administrators’ assessment of what is just and reasonable.
3. Costs. Rule 144(2)(e) required the plan to identify and address expenses of the special administration payable from client assets. Rule 137(1) left the method of allocating Objective 1 expenses to the administrators’ discretion, subject to the court’s consideration of whether the allocation was fair. The proposed charge of £2,250 on each account with an accepted client-asset claim was fair, particularly given the creditors’ committee’s and Financial Services Compensation Scheme’s approval and the capped nature of the estimated costs.
4. Return of assets. The plan facilitated return as soon as reasonably practicable. The administrators were not required to transfer cash where doing so would waste costs; it was sufficient that they relinquished control in accordance with the statutory concept of return.
5. Disposition. The court found that the plan was fair, reasonable and efficient, satisfied the requirements of the Regulations and Rules, and approved it in the form annexed to the draft order.