When informal workouts don’t work out: English High Court rules bank that lent support to restructuring did not dishonestly assist in putting assets beyond creditors’ reach

In the current economic climate, more and more companies are getting into financial difficulties, informal workouts by debtor companies, with support from certain creditors, seem to be increasingly common. The latest English High Court decision of Henderson & Jones Ltd v Ross & Ors [2023] EWHC 1276 (Ch) highlights a possible litigation risk for the supportive creditors – banks or funds alike – and the advisors involved, especially if the informal workout ultimately falls through.

From time to time, financial institutions are sued by liquidators of wound-up companies for dishonest assistance based on their past dealings with the company. We have defended a few of these claims, ranging from the more commonplace (e.g. the bank acted as a sponsor in the listing of the company now in liquidation), to the novel (e.g. the bank offered trade financing to the company in question). Continue reading