On
Background
The Company is an English holding company owning a group of gold mining and exploration companies operating in
Judgment
In its decision, the
The Court affirmed that there was nothing dishonourable in the Proposed Sale, and instead described the decision as “rational” and one that showed the administrators were discharging their duties by entering into a transaction they considered to be in the interests of the Company's creditors. Further, the Court expressed its view that the actions proposed by the administrators did not appear to breach the Regulations, and that the level of legal risk to the contrary was not such that it would be inappropriate for the administrators to enter into the Proposed Sale. Ultimately, the Court granted the requested permission to enter into the transaction.
The Court, however, was explicit in its intention not to bind OFSI through its declaration, stating that it would not be proper to make a decision that binds OFSI as to the correct construction of the Regulations in circumstances where the Court had not heard a full contrary argument, OFSI was not represented, and it was not necessary to make such a decision to give the administrators the relief they were seeking. The judgment also referred to the fact that the Company, through its solicitors, wrote to OFSI on numerous occasions (mostly without response) to notify OFSI first of the administration and later of the Proposed Sale, and to invite OFSI to inform the Company if it took the view that the transactions would breach the Regulations. The eventual response received from OFSI stated that the administrators should take their own view on whether a licence was required, and make any necessary application. The Court considered the possibility of withholding its declaration until the administrators applied for a licence to be sure of sanctions compliance (and until OFSI determined the application), but decided against this, noting the likely delay in OFSI determining the licence application and the likelihood of the business failing whilst waiting for the licence.
Key takeaways
The effect of sanctions - Insolvency has become an increasingly common by-product of the current sanctions landscape. Regardless of whether entities and individuals themselves are subject to sanctions under the Regulations, the effect of the Regulations, particularly on businesses with a Russian nexus, is being seen to have a potentially paralysing effect. In this case, the effect of sanctions was twofold - it both crippled the Company's business commercially and caused legitimate concerns of breach in the administrators' attempts to find the best solution for the Company's stakeholders.
OFSI's role - OFSI generally takes the view that persons will need to form their own view, and not rely on requested guidance from OFSI, as to whether a licence is required vis-ŕ-vis the Regulations. This was the response received by the administrators from OFSI when they sought to engage with OFSI regarding whether the Proposed Sale was compliant with the Regulations.
A matter of urgency - A prominent note throughout the judgment was the urgency of the matter due to circumstances surrounding the Proposed Sale. In other cases without such an urgent nature, the court may wish to hear from the shareholders, OFSI, and/or other relevant parties before deciding on the matter.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
©
Mr
CityPoint
EC2Y 9AW
Tel: 4152687000
Fax: 4152687522
E-mail: mcervantes@mofo.com
URL: www.mofo.com
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