The High Court has ruled that the appointment of joint liquidators to two insolvent companies in the GTLK Europe group rebuts the presumption that their assets remain controlled by their sanctioned Russian parent. It said the liquidators alone may deal with the companies’ assets during the winding-up.
The ruling concerns GTLK Europe DAC and its subsidiary, GTLK Europe Capital DAC, both in liquidation. Their ultimate parent, Joint Stock Company GTLK, is listed under the EU asset-freeze regulation. The companies themselves are not listed.
The joint liquidators applied under section 631 of the Companies Act 2014 for directions on whether the EU sanctions control presumption continued to apply after the companies were wound up. The Central Bank of Ireland and bondholder petitioners were notified. The Bank agreed with the liquidators’ legal analysis on control and beneficial ownership, while saying interpretation of the regulation was for the court.
Mr Justice Michael Quinn said the winding-up order and liquidators’ appointment removed control from shareholders and directors. Under Irish company law, he said, the liquidators were the only people entitled to deal with the companies’ assets. The court concluded that this rebutted the presumption of control by GTLK for the purposes of the asset-freeze regulation.
The judgment followed earlier proceedings. On 31 May 2023, Mr Justice Dignam dismissed the companies’ petitions for examinership and ordered them wound up, appointing Damien Murran and Julian Moroney as joint liquidators. Dignam J relied in part on the companies’ position in the examinership proceedings that they were insolvent. The winding-up petitions were struck out.
Quinn J also ruled that, on appointment of the liquidators, the companies ceased to be the beneficial owners of their assets. The assets are subject to the statutory distribution scheme, under which creditors’ claims take priority over any distribution to members. The judgment describes this as a statutory trust for the purposes of winding-up; it does not give creditors the beneficial ownership of the assets.
The court ordered that no distribution be made to the ultimate parent without a further court order, which cannot be made unless EU law permits it. Any surplus after costs, expenses and liabilities must be held in a designated account at an Irish-licensed credit institution. The Central Bank must receive notice of any application to release those funds.
The liquidators did not pursue a vesting order at the hearing, but were given liberty to apply for one if needed. The court also allowed the liquidators, the Central Bank and the petitioning creditors their costs as costs in the winding-up. The judgment gives directions for these liquidations; it does not authorise unrestricted payments or distributions to the parent.