No two major insolvencies are the same, while very few are straightforward. Virtually none, however, are as complex – and frustrating – as those in which government-imposed sanctions have forced the pace of a company’s insolvency, yet serve as restrictions for a Court-appointed practitioner pursuing a timely and constructive process.
Sanctions applied to companies for political reasons are rarely, if ever, applied on a case-by-case basis. They are a general economic weapon targeted against certain countries; as such, they impact citizens of those nations who are involved in legitimate businesses in other territories, and will inevitably face asset freezes and operating restrictions from a sanctioning government.
This indiscriminate approach can prove at best harmful, at worst terminal, for perfectly healthy and viable businesses connected (even tangentially) to citizens of sanctioned countries. Look no further than Buchler Phillips’ appointment in 2022 as Administrator to CargoLogicAir.
Operating as the only British all-cargo main deck freight airline, headquartered at London Heathrow Airport, CargoLogicAir [is/was] a unique and highly profitable British business which suffered as an unintended consequence of sanctions against Russia. The company, a significant local employer, was unable to trade effectively after its majority shareholder and former director, a Cypriot national [of Russian birth/citizenship], was made the subject of UK government sanctions against businesses deemed Russian controlled following the Russian invasion of Ukraine in February 2022. The shareholder became a ‘Designated Person’ pursuant to the Russia (Sanctions) (EU Exit) Regulations 2019 as amended on 16 June 2022. At a stroke, CargoLogicAir found itself cash-flow insolvent, yet with £13m frozen in the bank.
Recent dynamics in international relations suggest that sanctions are set to remain a key form of government retaliation in times of conflict. Buchler Phillips’ offers co-advisors, corporates and individuals invaluable experience of navigating the maze of official restrictions to achieve an optimal outcome.
- Extensive pre-appointment due diligence and understanding of a business and its structure, assets (both contingent and actual), liabilities and creditor position
- Working closely with specialist legal advisors as a commited team with as few participants as possible
- Early and open direct engagement with the Office of Financial Sanctions Implementation and key stakeholders, including relevant industry regulators and the company’s bank
- Relations with the Offical Receiver, the broader Insolvency Service and its own banking provisions
- Proactivity with essential suppliers and key stakeholders to mitigate any potential delays or gaps in the company’s records that may fetter the office holder’s ability to operate; and
- Timely identification of inter-related issues cause by the domino effect of sanctions, avoiding further unexpected costs that mght impact the position of creditors
- An appreciation of employees’ issues and routes to protect their position as far as possible within restrictions
We welcome discussions with managers of businesses that risk longer term sanctions as a result of their ownership or international activities, as well as with existing legal representatives of those entities