Welcome to INSOL’s monthly news update and this edition, like its predecessors, is packed with “must reads” from the global insolvency world. All eyes offshore and indeed beyond have been focused intently on the outcome of the Saad litigation and the revelation of the world’s largest ever Ponzi scheme, stretching over 30 years and involving billions of dollars of losses.
 
The bankruptcy world continues to buck the global trend of tariffs and borders with an ever-increasing internationalist approach. The Model Law flexed its muscles again in the Southern District of New York. In In re Platinum Partners, Chapter 15 was interpreted so broadly as to provide pre-action disclosure where it was not available in the foreign main proceeding. Certainly, a distinction from the common law analysis of assistance in Singularis.
 
Meanwhile, legislators are busy. Exciting new reforms are being debated in India, Singapore and, most notably, in the PRC.  We report on the Supreme People’s Court’s vision for a modern bankruptcy regime to provide means of ridding the nation of its zombie businesses whilst resuscitating the healthier ones. Whilst New Zealand are advanced with bespoke legislation aimed at unwinding Ponzi schemes.
   
From Australia, there is a report on an appeal which raised significant issues about the new statutory regime for the registration of liquidators in Australia following the reforms introduced by the Insolvency Law Reform Act 2016 (Cth). The England and Cayman appeal courts gave important guidance in the context of market valuations and validation orders. Elsewhere, the British Property Federation gave its views on the recent spate of UK CVAs seeking to reduce / compromise lease liabilities. It’s Venezuela’s turn to be in the Latin American spotlight in this edition. As litigation advances and judgments and awards begin to stockpile, the question of enforcement and the prospects of creditors and bond holders in the current political climate is examined
 
Finally, INSOL’s GDPR team were, of course, as effective as one would expect and as a result we can all enjoy this article on the top 5 issues of GDPR affecting financial institutions.
 
Andrew Thorp  
Partner
Harneys, British Virgin Islands

By

Andrew Thorp
Partner
Mark Rowlands

Harneys, British Virgin Islands  
  
To read the full article please click here

 
Cases
 
Cayman Islands
   
(i) Revealed: The Largest Ponzi Scheme the World has Ever Seen   
   
Ahmad Hamad Algosaibi & Brothers Company (AHAB) v Al-Sanea & Ors   
   
On 31 May 2018, judgment was handed down by the Cayman Court in favour of the liquidators of Saad Investments Company Limited (SICL) in a case that will become known for the revelation of the largest Ponzi scheme the world has ever seen. The Court found that members of a Saudi family, the Al-Gosaibis, together with another Kuwaiti born individual, Maan Al Sanea, who married into the family, have been responsible for running a massive fraud against more than 100 Saudi and international banks for more than two decades.
   
The case arose out of the collapse of businesses owned by the Al-Gosaibi family (AHAB) and Al Sanea in 2009. In an attempt to deflect liability, AHAB accused Al Sanea of forging signatures and documents to borrow billions of dollars in its name, and then of stealing the cash to expand his own businesses. In a 9 year case led by Joint Official Liquidators (JOLs), it was revealed that AHAB’s activities involved the churning of borrowings totalling approximately $330 billion over 20 plus years and were only brought to a halt by the freezing of the credit markets in 2008/9. 
   
For a case note by Grant Thornton, 31 May 2018 please click here
   
(ii) Recent Judgment of the Cayman Islands Court of Appeal Concerning Validation Orders 
  
Aurora Funds Management Limited et al -v- Torchlight GP Limited (Unreported, 27 April 2018) (CICA 1 of 2017) (unreported) 
  
In this recent decision, the Cayman Islands Court of Appeal dismissed an appeal brought in respect of an order made by McMillan J in the Grand Court validating certain payments made during the course of proceedings involving a just and equitable winding up petition, which was presented on 18 June 2015 against Torchlight Fund LP (the Partnership), a solvent, closed ended fund which specialises in investment in distressed assets. The Petition was brought by various limited partners of the Partnership. Whilst it was not in dispute that McMillan J had applied the correct legal test for the making of the validation order, the Appellants' principal complaint was that McMillan J had failed to give adequate reasons for his decision to make the validation order.  
   
For a case note by Conyers Dill & Pearman, May 2018 please click here 
  
USA
  
New York Bankruptcy Court Permits Discovery Requests in Chapter 15 Case Despite Potentially Conflicting Cayman Islands Law
  
In Re Platinum Partners Value Arbitrage Fund L.P. (In Official Liquidation) No. 16-12925, 2018 WL 1864931 (Bankr. S.D.N.Y. Apr. 17, 2018)
  
On 17 April 2018, the U.S. Bankruptcy Court for the Southern District of New York issued a decision requiring CohnReznick LLP (CohnReznick) to produce documents requested by the foreign representatives in the chapter 15 case of Platinum Partners Venture Arbitrage Fund (International) Limited (in Official Liquidation).
  
CohnReznick argued inter alia that it did not need to comply with the requests because (Cayman Islands law precludes the production of the requested documents. The Bankruptcy Court rejected this argument noting that “…it is well established that comity does not require that the relief available in the United States be identical to the relief sought in the foreign bankruptcy proceeding; it is sufficient if the result is comparable and that the foreign laws are not repugnant to our laws and policies.”
   
For a case note by Cole Schotz P.C., 14 May 2018 please click here
   
For the case decision please click here
  
Articles
  
Venezuela
  
Start Your Engines: Are We Going to See More Creditor Recovery Efforts in Venezuela?  
  
Recent weeks have seen a step-up in creditor efforts to pursue court judgments and judicial execution on the assets of Petróleos de Venezuela, S.A. (PDVSA). This article summarises the magnitude of the claims against PDVSA and the Republic – both those that have been reduced to arbitral awards or judgments and are in various stages of enforcement proceedings, as well as the much larger pool of additional claims that are not (yet) in litigation but could become the subject of judicial proceedings. It also provides an update on the pending enforcement proceedings in the United States and elsewhere and the possible ramifications of those proceedings directly for the creditors involved and indirectly for those other PDVSA and Republic creditors watching from the sidelines. 
   
For the full article please see Cleary Gottlieb Steen & Hamilton LLP Alert Memorandum, 29 May 2018
   
This article was published by the Social Science Research Network. 

Cases
  
Australia
  
AAT Approves Registered Liquidator Application of Non-Resident and Provides Important Clarification in Respect of the New Registration Regime 
      
This appeal application before the Administrative Appeals Tribunal (AAT) by Mitchell Mansfield of Borrelli Walsh, an Australian citizen who now resides in and works in Singapore, raised significant issues about the new statutory regime for the registration of liquidators following the reforms introduced by the Insolvency Law Reform Act 2016 (Cth). It is the first case before the AAT where the operation of the new regime has been considered. 
  
The decision provides clear and persuasive guidance to applicants, in particular, with respect to the discretionary pathway to registration pursuant to subsection 20-20(5) of the Corporations Schedule and the meaning of ‘exposure to processes’ under the Bankruptcy Act.  The clarification provided by this case may assist to enable practitioners to strengthen their cross-border capabilities and to provide a pathway for practitioners to return to the jurisdiction following temporary absence.
   
For a case note by Norton Rose Fulbright, 8 June 2018 please click here
 
For the case decision please click here
 
Legislation
 
New Zealand
 
Bespoke Regime for Unwinding Ponzi Schemes  
  
There is currently no targeted regime in New Zealand providing for the recovery of investor funds lost in a Ponzi scheme. When unwinding a Ponzi scheme, the courts and insolvency professionals often find themselves in the position of trying to apply the insolvency regime in the Companies Act 1993 and, in some cases, the prejudicial dispositions regime in the Property Law Act 2007. Neither of these regimes was designed for recoveries where the purpose of the business was to defraud investors.
  
The Ministry of Business, Innovation and Employment is proposing that a new liquidation mechanism be incorporated within the Financial Markets Conduct Act 2013. The objectives of the proposed new regime for unwinding Ponzi schemes are to:

• provide consistent outcomes for investors;
  
• share losses among investors as fairly as possible; and
  
• minimise the cost to investors of unwinding the scheme.

A discussion paper outlining the options was released this month. Submissions close on 6 July 2018.
 
For the full article please see Chapman Tripp Brief Counsel, 5 June 2018
 
For the discussion paper please click here 
   
Singapore
  
Corporate and Individual Bankruptcy Under One Roof What to Expect in the Upcoming Insolvency Bill
  
A new Insolvency Bill in the works is expected to further transform Singapore’s bankruptcy landscape, perhaps most notably by consolidating the existing individual and corporate bankruptcy legislation. At present, the rules relating to corporate and personal insolvency are generally housed separately- within the Companies Act (Cap 50, 2006 Rev Ed) and the Bankruptcy Act (Cap 20, Rev Ed 2009) respectively. This Bill may impact virtually every type of company as many will find themselves concerned with insolvency laws during their lifecycle.  This article explores the business rationale behind the changes and the nature of the expected amendments.
  
For the full article please see Dentons Rodyk Insight, 31 May 2018
   
Articles

India
  
Issues Arising Under the Indian Bankruptcy Code - an International Perspective
  
With further reform of the new Indian Bankruptcy Code (IBC) in prospect, this article identifies six issues which have come up as areas for potential reform.  The authors offer their thoughts and experiences in respect of each issue and provide a short summary of the approach taken in the UK, and a comment on the current position under Indian law. Some of the issues addressed include:

• Should the resolution professional be an individual or an incorporated entity (e.g. company, limited partnership or other partnership entity)?
  
• Should the law permit the disposal of viable businesses and assets as part of a resolution plan rather than emphasising the survival of the corporate debtor in question?
  
• How best to “whitewash” liabilities predating the commencement of CIRP in a resolution plan (those liabilities being actual, future, contingent, known or unknown at that date and thereafter)?

For the full article please see Herbert Smith Freehills Hong Kong e-bulletin, 4 June 2018

 
INSOL International Technical Paper Series – Cross-Border Insolvency in Singapore: The Effectiveness of the Judicial Insolvency Network and the JIN Guidelines on the Administration of Cross-Border Insolvency Matters 
  

May 2018

The adoption of the UNCITRAL Model Law on Cross-Border Insolvency, the creation and inaugural conference of the Judicial Insolvency Network (JIN) and the formulation of the Guidelines for Communication and Cooperation between Courts in Cross-Border Insolvency Matters developed by the JIN (the Guidelines) represents a concerted effort by both the legislature and the judiciary of Singapore to create a place for Singapore as a leading regional hub for international debt-restructuring, insolvency and corporate rescue.
   
This excellent paper explores the effectiveness of the JIN and the Guidelines in the administration of cross-border insolvency matters and compares them with the UNCITRAL Model Law on Cross-Border Insolvency. This paper then examines some unique challenges and opportunities faced by the JIN and the Guidelines in the administration of multi-national cross-border insolvencies. 
      

If you would like to send an article for inclusion in one of our forthcoming issues please contact our Technical Officer, Louise Jennings at louise@insol.ision.co.uk

If you would like to introduce a new member to INSOL International please contact our Database Manager, Tony Ashton, at tony@insol.ision.co.uk

American Bankruptcy Institute  
Asociación Argentina de Estudios Sobre la Insolvencia  
Asociacion Uruguaya de Asesores en Insolvencia y Reestructuraciones Empresariales  
Association of Business Recovery Professionals - R3  
Association of Restructuring and Insolvency Experts  
Australian Restructuring, Insolvency and Turnaround Association  
Bankruptcy Law and Restructuring Research Centre, China University of Politics and Law 
Business Recovery and Insolvency Practitioners Association of Nigeria  
Business Recovery and Insolvency Practitioners Association of Sri Lanka  
Canadian Association of Insolvency and Restructuring Professionals  
Canadian Bar Association (Bankruptcy and Insolvency Section)  
Commercial Law League of America (Bankruptcy and Insolvency Section)  
Especialistas de Concursos Mercantiles de Mexico  
Finnish Insolvency Law Association  
Ghana Association of Restructuring and Insolvency Advisors  
Hong Kong Institute of Certified Public Accountants (Restructuring and Insolvency Faculty)  
INSOL Europe  
INSOL India  
INSOLAD - Vereniging Insolventierecht Advocaten 
Insolvency Practitioners Association of Malaysia  
Insolvency Practitioners Association of Singapore  
Instituto Brasileiro de Estudos de Recuperação de Empresas  
Instituto Brasileiro de Gestão e Turnaround  
Instituto Iberoamericano de Derecho Concursal  
Instituto Iberoamericano de Derecho Concursal Colombia
International Association of Insurance Receivers  
International Women’s Insolvency and Restructuring Confederation  
Japanese Federation of Insolvency Professionals 
Korean Restructuring and Insolvency Practitioners Association   
Law Council of Australia (Business Law Section)  
Malaysian Institute of Certified Public Accountants  
National Association of Federal Equity Receivers  
Nepalese Insolvency Practitioners Association  
NIVD – Neue Insolvenzverwaltervereinigung Deutschlands e.V.  
  Recovery and Insolvency Specialists Association (BVI) Ltd  
 Recovery and Insolvency Specialists Association (Cayman) Ltd 
Restructuring and Insolvency Specialists Association of Bahamas
Restructuring and Insolvency Specialists Association of Bermuda 
REFOR–CGE, Register of Insolvency Practitioners within "Consejo General de Economistas, CGE"  
Restructuring Insolvency & Turnaround Association of New Zealand  
Russian Union of Self-Regulated Organizations of Arbitration Managers  
Society of Insolvency Practitioners of India  
South African Restructuring and Insolvency Practitioners Association   
Turnaround Management Association do Brasil
Turnaround Management Association (INSOL Special Interest Group)