VTB Capital Plc, Re

The court dealt with two live applications by the administrators of VTB Capital Plc: (i) an application under Schedule B1 to the Insolvency Act 1986 for an extension of the period of administration and (ii) an application to regularise the means by which progress reports have been provided to creditors under the 2004 Credit Institutions Reorganisation and Winding Up Regulations (CIRWR). The court found that the administration was effectively in distribution mode, that liquidation would be disadvantageous at this stage and that continuation of the administration was in the best interests of creditors as a whole. On that basis and having regard to the tests in Schedule B1 (in particular paragraphs 76 and 78) and the authorities relied upon (including In re Lehman Brothers International Europe and In re Nortel), the court granted a five year extension of the administration to 5 December 2029. The court also regularised the administrators' prior use of the Insolvency Rules 2016 for creditor reporting by making an order under CIRWR Regulation 16(3) directing future progress reports to be made pursuant to the 2016 Rules.

Background and parties. VTB Capital Plc (in administration) ("VTB") is a UK-registered public company ultimately owned by PJSC VTB Bank. Following the application of the UK sanctions regime and the closure of its correspondent bank account, VTB became unable to pay its debts and administrators were appointed in 2022. The administrators propose, among other measures, a scheme of arrangement to facilitate distribution to creditors; that scheme and the related permission to distribute were adjourned and are not determined in this judgment.

Nature of the applications. Four applications were originally listed: (i) sanction of a proposed scheme of arrangement, (ii) permission to distribute, (iii) an extension of the period of administration by five years, and (iv) regularisation of the form and frequency of progress reports to creditors under CIRWR. Because the scheme hearing and related permission to distribute were adjourned, the court was asked to determine only (iii) and (iv).

Issues framed by the court. The court identified two principal issues for decision: (1) whether the administrators should be granted a further five year extension of their appointment under Schedule B1 to the Insolvency Act 1986, having regard to paragraphs 76 and 78 and the interests of creditors, and the applicable guidance in authorities such as In re Lehman Brothers International Europe and In re Nortel; and (2) whether the administrators' prior and future use of the Insolvency Rules 2016 for progress reporting (rather than the form and frequency in CIRWR) should be regularised under CIRWR Regulation 16(3).

Court's reasoning and findings. The court accepted the administrators' evidence that the administration is effectively in distribution mode, that a scheme of arrangement has been promoted to facilitate distribution and that there are substantial complexities arising from sanctions, "trapped" assets, recovery obstacles and cross‑jurisdictional licence conditions. The court considered that liquidation at this stage would be likely to be disadvantageous to creditors (including in respect of statutory interest accrued in administration). Applying the principles in the cited authorities, the judge concluded that an extension to 5 December 2029 was reasonably necessary to enable the administrators to complete their mandate and was in the best interests of creditors as a whole. On the CIRWR point, the court accepted that using the Insolvency Rules 2016 had been an error but one that favoured creditors by providing more frequent and effective reporting; there had been no prejudice to creditors and therefore it was appropriate to regularise the position under Regulation 16(3).

Procedural posture. The scheme hearing and the application for permission to distribute were adjourned; those matters were to be relisted. The present judgment grants the administration extension and the reporting regularisation order.

The court granted the administrators' application for an extension of the period of administration to 5 December 2029 and made an order under CIRWR Regulation 16(3) directing that progress reports be made pursuant to the Insolvency Rules 2016. The extension was allowed because the administration is in distribution mode, liquidation would be disadvantageous and the proposed extension is reasonably necessary and in the best interests of creditors given the significant sanctions-related and cross-border complexities. The reporting method was regularised because the prior divergence from CIRWR advantaged creditors and caused no prejudice. The scheme and permission to distribute were adjourned for later determination.