Today the High Court approved a procedure for distributing the approximately $1 billion of client money held by MF Global UK Limited (in special administration) (MFG UK).
The application was made by the Administrators of MFG UK to address the fact that there is no such distribution procedure in the Financial Conduct Authority’s client money rules, nor is there one in The Investment Bank Special Administration Rules. The absence of such a procedure meant that the Administrators had to make substantial reserves for claims they considered to be invalid, and for unknown claims.
Weil, together with the Administrators and external counsel, drafted a unique client money distribution procedure, which will now enable the Administrators and MFG UK to distribute client monies under a clear and fair procedure, without the need to reserve for unknown claims or for rejected claims that are not appealed.
Mark Lawford in Weil’s Business Finance & Restructuring team in London commented that, “In the absence of a statutory procedure for distributing client money, we had to apply for directions on the basis of the Court’s inherent jurisdiction to direct the distribution of trust property. The Order is effectively a Re Benjamin order, permitting MFG UK and the Administrators to distribute client money on the assumptions: (a) that the only clients who are entitled to claim client money are those of whom the Administrators are actually aware; and (b) that clients whose claims have been rejected have no claims, unless they have appealed within the requisite time limit. This will facilitate the prompt distribution of client money and is an excellent outcome for clients of MFG UK.”
The Client Money Distribution Application was led by London partner and head of Weil’s London Restructuring team, Adam Plainer, assisted by Mark Lawford, Tom Laidler, and Kirsten Erichsen. The Administrators were represented in Court by Antony Zacaroli QC and Adam Al-Attar of 3/4 South Square.
As part of its representation of the Administrators of MF Global UK Limited, which is the largest European collapse since Lehman, Weil is fielding a multi-disciplinary team, led by Adam Plainer. This judgment follows a series of historic landmark Court approvals, including, initially in July last year of the first distribution plan for the return of client assets under the special administration regime, and most recently in January this year, the Hindsight Application judgment.
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