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Pooling Arrangements in Cross-Border Insolvencies

Samantha Knights, Barrister, 3-4 South Square, London, UK


Every liquidator’s dream is the collapse of a multimillion dollar enterprise with subsidiaries, assets and liabilities scattered throughout the world. But in a scenario where there has been long-term and widespread intermingling of funds between the separate entities which make up the corporate structure, the dream could turn into a nightmare. Complex practical and legal issues surrounding the realization of assets outside the jurisdiction, ascertainment of liabilities, and reconciliation of the inter-company debt position which require the cooperation of competing insolvency practitioners appointed in different jurisdictions are inevitable. Unless a pragmatic solution is found to the problem of collecting and distributing the worldwide assets among the global body of creditors, sleepless nights are ahead.
The outline above is hardly novel given some of the spectacular collapses in the previous two decades - Blue Arrow, Maxwell, BCCI, Enron, to name but a few. This article examines how pooling arrangements, whereby typically all assets are collected in one account and distributed rateably among all the creditors wherever situated, have been used by officeholders in cross-border insolvencies and how they have been regarded by the English courts.

Re Macfadyen & Co

The use of a pooling arrangement is most usually associated with the BCCI liquidation. However, as early as the first decade of the last century, the English court was asked to approve such an arrangement. In Re Macfadyen & Co, ex parte Vizianagaran Co Ltd the High Court (Bigham J) considered an agreement in relation to a firm of merchants and bankers who operated out of London under the name of P Macfadyen & Co and out of Madras, India under the name of Arbuthnot & Co. The agreement for the pooling of assets and their rateable distribution among the English and foreign creditors was drawn up by the English trustee in bankruptcy and the official assignee in Madras. There were over 1000 creditors of Macfadyen & Co in England and liabilities of about 400,000 sterling; and about 7000 creditors of Arbuthnot & Co in India and liabilities of over 1 million sterling.
The two office-holders concluded an agreement whereby the two insolvent firms were to be treated as one and the same business, all creditors were to be entitled to share rateably in the pooled assets and there was to be cooperation between the trustee and assignee in order to give full effect to the agreement. The agreement was subject to the approval of the English and Indian courts, which was granted. Meanwhile, as a result of the large numbers of creditors in India it was not practical to hold a representative general meeting of creditors and a question arose as to the trustee’s capacity to enter into the scheme. A large creditor of Macfadyen & Co then applied to the English court for a declaration that the trustee was not legally entitled to enter into the agreement. Bigham J in upholding the agreement stated in a succinct judgment:

I will make an order authorizing Mr Cooper to enter into the proposed agreement. I consider it is clearly a proper and common-sense business arrangement to make, and one manifestly for the benefit of all parties interested. I think both parties were entitled to come to the Court and ask for its protection, which the order I now make will give them.


The facts relating to the winding up of the Bank of Credit and Commerce International SA and its many related companies are well known. When it went down on 5 July 1991, the liabilities of the bank were thought to be between USD 10bn (GBP 7bn) and USD 20bn (GBP 14bn), making its global insolvency probably the largest ever in terms of liabilities. With branches in some 69 countries, it was also thought to have involved more jurisdictions outside the countries of incorporation than anything that preceded it.

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