VTB Capital Plc (in administration), Re
[2024] EWHC 1777 (Ch)
VTB Capital Plc, Re
10 October 2024
[2024] EWHC 2612 (Ch)
High Court
A company, VTB, is in financial trouble because of sanctions. The judge decided to keep it in administration for five more years to try and get money back to its creditors instead of closing it down. The judge also approved a slightly irregular way the administrators reported to the creditors, as this accidentally helped them.
Key Facts
- •VTB Capital Plc (VTB) is in administration.
- •Administrators sought sanction of a scheme of arrangement, permission to distribute, a five-year extension of the administration period, and regularisation of progress report provision to creditors.
- •VTB is ultimately owned by PJSC VTB Bank, majority-owned by the Russian Federation.
- •UK sanctions rendered VTB unable to pay its debts.
- •The administration's primary purpose is to achieve a better result for creditors than liquidation.
- •Significant assets are trapped due to sanctions.
- •There are substantial unsecured liabilities, including a significant claim by VTB Bank.
- •A scheme of arrangement is proposed to facilitate quicker and more efficient distribution to creditors.
- •A scheme meeting was adjourned due to objections from major creditors.
- •Administrators previously reported progress using the 2016 Insolvency Rules instead of the 2004 CIRWR.
Legal Principles
In considering extensions to administration periods, the court should consider whether the purpose of the administration remains reasonably likely to be achieved, whether prejudice would be caused to creditors, and any views expressed by creditors. If a company is making distributions, extending the administration to allow distributions is likely appropriate.
In re Nortel [2017] EWHC 3299 (Ch)
Once an administration moves to distribution mode, the working assumption should be that the administration should be maintained for as long as reasonably necessary to complete the distribution process, unless good cause is shown for liquidation.
In re Lehman Brothers International Europe (in administration) [2016] EWHC 3379 (Ch)
The distribution regime applicable to VTB is that under the Insolvency Act 1986 and the Insolvency Rules 2016, subject to limited applicable provisions of the CIRWR.
Insolvency Act 1986, Insolvency Rules 2016, CIRWR
Outcomes
The court granted a five-year extension to the administration period.
The administration is in distribution mode; liquidation would be disadvantageous; distribution in administration or through the scheme will produce a better result for creditors than liquidation; the complexity of the case and the need to navigate sanctions regimes justify the extension.
The court regularised the Administrators' past and future conduct regarding progress reports to creditors.
The Administrators mistakenly used the 2016 Insolvency Rules instead of the CIRWR; this error benefited creditors; the court made an order under CIRWR, Regulation 16(3), directing future progress reports to follow the 2016 Rules.
The application relating to the proposed scheme of arrangement was adjourned to early next year.
It was no longer possible to determine the application due to reasons explained in Mr. Browne's fourth witness statement, and the related scheme meeting was adjourned.
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