Credit Suisse Virtuoso Sicav-Sif & Anor v Softbank Group Corp. & Ors

For the purposes of Insolvency Act 1986 section 423, a transaction is identified by a fact-sensitive, common-sense analysis directed to the statutory purpose. Linked agreements involving different parties do not necessarily form one transaction, particularly where the debtor entered only some of them.

Undervalue is assessed objectively from the debtor’s perspective by comparing what it provided with what it received in money or money’s worth. A consequential release of liabilities under a pass-through arrangement is not consideration obtained by the debtor.

The statutory purpose under section 423 must be positively intended, although it need not be the sole or dominant purpose. Relief under sections 423 and 425 is restorative and protective, flexible, and may take account of post-transaction events, benefits received, culpability and subsequent loss in value.

The claimants invested in securitised notes issued under the Fairymead Multi-Obligor Programme. The notes were backed indirectly by receivables and security held by Greensill Limited under a receivables purchase agreement with companies in the Katerra Group.

On 30 December 2020, Greensill Limited entered into a Contribution and Exchange Agreement releasing Katerra’s indebtedness and security in exchange for shares. It immediately transferred those shares to an entity within the SoftBank Group under a Share Transfer Agreement. The claimants alleged that the agreements were transactions at an undervalue entered into for the purpose of prejudicing creditors under section 423 of the Insolvency Act 1986.

The central issues were the identity of the transaction, undervalue, statutory purpose, victim status and the appropriate relief against the SoftBank defendants.

1. Transaction. The Contribution and Exchange Agreement and Share Transfer Agreement together constituted the relevant transaction. The wider package of agreements involving SoftBank, Greensill and Katerra did not. The statutory concept is broad, but linked agreements involving different parties will not ordinarily be aggregated unless the division is artificial. The debtor must have entered into the transaction, although arrangements not constituting legally binding contracts may in an appropriate case be included.
2. Undervalue. Greensill Limited released valuable rights under the receivables purchase agreement and related security. It received no consideration in money or money’s worth. The fact that release of the receivables also relieved corresponding pass-through obligations under the Participation Agreement was merely a consequence of the existing structure, not consideration obtained from the transaction. The transaction was therefore at an undervalue.
3. Purpose. Mr Greensill’s knowledge, intention and purpose were attributable to Greensill Limited. At the transaction date he knew that the agreement extinguished the only assets securing the noteholders’ interests and transformed their position from effectively secured creditors of Katerra into unsecured creditors of the Greensill Group. The relevant purpose need not be sole or dominant. Although he wished ultimately to preserve the noteholders and the wider business, he positively intended the release necessary to secure Katerra’s recapitalisation and keep SoftBank engaged, knowing its prejudicial effect.
4. Relief. Relief under sections 423 and 425 is restorative and protective, not compensatory. The court may consider subsequent events, the recipient’s benefit, involvement, knowledge, culpability and the value of property at the date of the order. The SoftBank defendants did not share or know of Greensill Limited’s improper purpose. SVF II received shares valued at approximately $11.3 million, but the shares were cancelled when Katerra entered bankruptcy. No order was therefore appropriate. The claim was dismissed.