Signal Real Estate - Case Update

Is it appropriate for a Scottish administration to be recognised as ancillary only to a Luxembourg winding-up where the company’s principal asset is property situated in Scotland? Yes, according to the Scottish Court of Session.

The issue arose in the administration of Signal Real Estate, a Luxembourg-registered company which had as its sole asset an interest as tenant in a 125-year commercial lease of office premises in the International Financial Services District of Glasgow.

Stuart Preston and Julie Tait of Grant Thornton were appointed joint administrators in March. Around the same time, the company’s directors sought a bankruptcy order in Luxembourg, which was granted, making the company subject to two concurrent insolvency processes in two separate jurisdictions. Neither had been declared ancillary to the other.

In order to avoid potential conflict, the joint administrators and the bankruptcy receiver negotiated a co-operation protocol designed to enable them to work together to realise the company’s assets. The administrators then sought directions from the Scottish Court as to whether it was appropriate for them to enter into the protocol.

The Court raised concerns with certain aspects of the protocol which seemed in practice to render the administration a mere adjunct to the Luxembourg liquidation process and/or effectively removed from the Scottish Court any sensible power of oversight in relation to the administration. Counsel for the administrators acknowledged the force of these concerns, but in general terms submitted that the terms of the protocol reflected the outcome of negotiation between the administrators and the receiver which unavoidably involved compromise.

The Court then went on to consider whether there can be such a thing as an ancillary administration, and ultimately concluded that it was not being asked to institute an ancillary administration. Rather, it was being asked to give directions as to the future conduct of an extant administration in which the administrators wish the Court's sanction to enter into an arrangement with the Luxembourg receiver on terms which seemed to not so tacitly to acknowledge the de facto ancillary nature of the administration. The Court could see no reason why it should not formally recognise that Luxembourg is a more appropriate forum than Scotland for the purpose of dealing with the overall insolvency of the company.

Accordingly, the Court directed that the administration be regarded as ancillary to the primary insolvency process underway in Luxembourg.

Read the decision here.

Professionals involved: DM Thomson KC, Boffey; DLA Piper for the joint administrators.