Jurisdiction(s):
United Kingdom

Members’ voluntary liquidation: Court upholds shareholder indemnity protecting liquidator against HMRC APNs from EBTs; no implied terms—drafting guidance from Currie v Thornley [2019] EWHC 172 (Ch) (England and Wales)

Published on: 18 February 2019

Published by a LexisNexis Restructuring & Insolvency expert

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Article summary

Currie v Thornley and another [2019] EWHC 172 (Ch), [2019] All ER (D) 19 (Feb) What are the practical implications of this decision?

Liquidators will typically insist on tightly drafted indemnity deeds when they are effecting distributions of a company’s assets to shareholders in an MVL, particularly where there remains any possibility of creditors bringing later claims in the liquidation. In Currie v Thornley and another, the company’s assets—real estate used in running a care home—were transferred to a limited liability partnership set up by the company’s former shareholders, at a point when contingent claims existed against the company. If those contingencies crystallised, the liquidator might face proceedings for failing to discharge his duties to the company by permitting assets to be transferred out before first settling sums owed to creditors. Although indemnity deeds are very common, especially in scenarios involving in-specie distributions of cash and/or property to members, often undertaken on the ‘day one’ of a liquidation, it is less common to see assets distributed where there are sizeable contingent claims against the company. Consequently, liquidators conducting MVLs are likely to prefer robust indemnity wording wherever any later creditor exposure could arise, before allowing assets to be paid away to...

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