Asset Tracing & Enforcement update: April 2016

Written on 14 Apr 2016

Welcome to the latest edition of Osborne Clarke’s Asset Tracing and Enforcement update.

In this edition, we look at a new corporate obligation which is likely to prove a valuable resource for tracing assets within the UK, the “People with Significant Control” (PSC) register. The PSC register foreshadows similar rules to be introduced across the EU via the Fourth Money Laundering Directive, and so its implementation in the UK is being followed with particular interest by all involved in identifying the ultimate beneficial owners or controllers of companies.

We also look at key developments in three different enforcement tools: freezing orders, orders to attend court for questioning about assets, and the ability to “pierce the corporate veil” to target assets of the owners of companies.

Finally, we attach the UK chapter of Practical Law’s Global Guide to the Enforcement of Judgments and Awards, which we have authored.

Please let us know if you would like to discuss any of the content of this update.

Corporate transparency: how can the new PSC register help to trace assets?

With the “Panama Papers” continuing to dominate news agendas, it is highly relevant that since 6 April 2016, all unlisted UK companies and limited liability partnerships have been required to keep a “PSC register”, recording (or enabling the identification of) all individuals who have “significant control” over them. This might be by owning or controlling 25% or more of the shares or voting rights, having the ability to appoint or remove the majority of the board or otherwise exercising significant influence or control over the company or
LLP.

Companies and LLPs will need to provide that information to Companies House from 20 June 2016, as part of their annual filings. That information is open to public inspection. There are sanctions for company officers that do not comply with these obligations.

The PSC register may prove a valuable source of information for judgment debtors (or prospective claimants) looking to trace assets, in conjunction with the wide range of tools available under English law to enforce against any assets that are found within the jurisdiction. Nevertheless, it remains to be seen how stringent the courts will be in upholding company officers’ duties to obtain information, and where arrangements involve complex trust arrangements, evasive and determined debtors may still prove difficult to trace and enforce against.

For more information on the PSC register, see our quick guide and fuller briefing note.

Freezing orders: loan agreement payments to third parties amount to breach of worldwide freezing order in the latest twist in Ablyazov

The Supreme Court has decided unanimously that where an individual or company is subject to a freezing order, borrowing money pursuant to a loan agreement and using that money does breach the freezing order.

In this case, loan proceeds drawn down by third parties (but at the instruction of Mr Ablyazov who was the subject of a worldwide freezing order at the time) were “assets” for the purposes of the freezing order because the respondent had the power
directly or indirectly to dispose of, or deal with [the proceeds] as if they were his own“. The draw down therefore amounted to a “disposing of” or “dealing with” the assets in breach of the freezing order.

Read more >

No dodging the question: High Court refuses to set aside order for questioning of a non-UK resident

For judgment creditors seeking information on a judgment debtor’s assets, English law provides a valuable tool to compel individuals to attend court to answer questions about their assets.

In Deutsche Bank AG v Sebastian Holdings Inc and another, the High Court upheld an order (pursuant to Civil Procedure Rule (CPR) 71) requiring a non-resident foreign officer of an overseas company to attend court to produce documentation and attend court for examination. Normally this form of order will not be granted against directors resident outside the UK but the order was allowed in this case because the director had been present in England at the time that the application to the court was made.

Read more >

Piercing the corporate veil: using the evasion principle to pierce corporate veil of companies operated by a bankrupt

In Wood and another v Baker and others, the High Court considered an application by joint trustees in bankruptcy for an injunction freezing the business and assets of third parties which were operated by an undischarged bankrupt to conceal assets properly belonging to him.

The court made an interim order (under CPR 25.1(1)(c)(i)) for the preservation of relevant property. This is the first time the court has pierced the corporate veil in a bankruptcy context. In doing so, it was persuaded that the evasion principle was the most compelling analysis of the legal basis of the trustees’ application.

Read more >

Open for business: good news for those looking to enforce a judgment in Dubai

Over the past year, a series of decisions from the Dubai courts have demonstrated an increasing support for international arbitration. The Dubai International Financial Centre Court of Appeal decision in DNB Bank ASA v Gulf Eyadah Corporation and another continues this trend, allowing the enforcement of foreign judgments through the DIFC courts and onshore courts, in the same way as an arbitral award.

The DIFC Court of Appeal’s express approval of the use of DIFC courts as a conduit to “onshore” Dubai will be welcomed by judgment debtors looking to enforce against assets held in onshore Dubai. However, the crucial issue will be what approach is taken by the local onshore courts.

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When is personal service effected on a non-English speaking defendant?

In Tseitline v Mikhelson, the court considered whether proceedings had been personally served on a defendant who did not speak English. The court found that the documents were left near the defendant long enough for him to exercise control over them, and inferred from his conduct that he understood he was being served with legal documents, even though he did not speak English.

Read more >

Practical Law guide to enforcing judgments and awards: UK chapter

We have authored the UK chapter of Practical Law’s global guide to enforcing judgments and awards. The guide covers the legal regime as it applies both to judgments and arbitral awards, domestic and overseas.

Please click here to read the UK chapter of the guide. The full global guide is available from Practical Law’s website, (click here
for the enforcement of awards and here for the enforcement of judgments).