Acts of Parliament and financial regulations of the UK

Issue

Mr. Hudson wants legal advice as they stuck in some situations and do not figure what to do. legal principles and Uk laws will help him in deciding the suitable decision. Mr. Hudson pays a visit to Tripity bank and to learn about the investment methods. His sole income source is from the pension as he is a retired old man. Mr. AA timid offers financial advice to Hudson to invest its money in the shares. During its financial advice, he convinced him to invest in the vanilla company. He shows evidence that the shares of this company are very successful and generate enough returns and used by the bank. He said that tripity bank uses this to its customers consider as ‘DUCT’. He forced him to invest 100k pounds and he agreed

After some weeks, he read the news in the newspaper about the insolvency of this company that was solely managed by Mr. AA timidu. Mr. Hudson is restless to seek advice to get justice and recover its money from Mr.Timidu.

Rule

UK insolvency law formed under the companies act 2006, covers the matter related to the insolvency of an entity. Insolvent means a company is not able to pay off all its debts to its creditors[

UK law offers support to banks and individuals associated with the insolvent company for a security interest. Security of interest means paying a fixed amount or value of the asset to the company that goes insolvent.

Bankruptcy act 1954 gives priority to all the creditors who owe money from the bankrupt company who went insolvent. As per this law, every creditor will get 50% for every 1 pound spent by an individual.

On the verge of companies went bankrupt, the court of law appoint an insolvency practitioner for paying off the debt of the creditors and the bank using assets. The insolvency cases manged by a separate tribunal headed y the insolvency act 1986.

The trustee distributes the money owed by the people from the proceeds of the assets to different users:

  • Charges of liquidity
  • Debt owe by creditors
  • Paying off to the company
  • Unsecured creditors
  • Interest
  • Shareholders

Creditors of the shareholders need to wait for a couple of weeks, months and years in some cases for getting the money back. The uncertainty ratio is higher as Insolvency practitioners take a lot of time in selling the assets. The proceeds generated from sales distributed among the recipients as per the priority.

Analysis

In the current case, Mr. Hudson invested 100k pounds as shares in the vanilla company on the advice of Mr. Timidu. As per the uk insolvency act and bankruptcy act 1954, he will get his money back

He will not get full money as solely depending on the sales proceeds arises from the assets of the bankrupt company .

But as per bankruptcy act 1954, he will get 50 % of what he has spent

= 100,000*50%

= 50000 pound

As per the case-law of BNY corporate trustee services Ltd v Eurosail [2013]. This case is about the case of insolvency where the insolvency act 1986 takes into account.  The case proceedings get completed under section 123 of the insolvency act.

Conclusion

It is summarized from the case that Mr. Hudson will get compensation from the vanilla company for its investment in vanilla. Various Uk laws help this user in receiving its money back by appointing an insolvency practitioner. The role of this officer is to help all the creditors and the users whose money gets stuck in the company. Mr. Timidu gets liable to pay off the actual or nominal damages for its fraud.

 

[1] Nsubuga. Employee rights in corporate insolvency: a UK and US perspective. Routledge. [2019].

 

[2] Stevenson. Grab the Fire Extinguisher: Comparing UK Schemes of Arrangement to US Corporate Bankruptcy After Jevic. Available at SSRN 3378826. [ 2019]

 

[3] Money recovering from bankruptcy.  (2019) Available  through: < https> [Accessed on 16th April 2020].

 

[4] Hardison. Express Preclusion of the Federal Arbitration Act for All Bankruptcy-Related Matters. St. John's Law Review. 93(3).  [2020] p.8.

[5] Singh. Pre-packaged Insolvency in India: Lessons from USA and UK. Available at SSRN 3518287. [2020]

 

[6] BNY Corporate Trustee Services Ltd v Eurosail case laws. [2013]

 

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