Posted on Aug 02, 2013 by | 0 Comments
The announcement a year ago that the then-FSA (now FCA) was launching a review into the misselling of swaps was a pivotal moment, bringing hope to many. However, for some companies, it came too late, with the burden of the swap payments having tipped them into insolvency. For many it has proved well nigh impossible to get the liquidator or insolvency practitioner (often appointed by the bank) to take any interest in the FCA review process. Even if your IP is prepared to take an interest, it seems inevitable that any redress will simply “wash back” to the Bank who are almost invariably the largest and very often the only secured creditor.
Finally some light at the end of the tunnel: Jon Welsby (@missoldswap) of pressure group Bully Banks has emerged as the champion of insolvent companies, and appears to be gaining some traction. Two crucial meetings have taken place with the FCA, attended also by the Insolvency Service, HMRC, and the Department for Business Innovation and Skills, to consider ways in which insolvent companies can participate in the FCA review process. The first Insolvency Fact Finding Meeting, to be attended by the insolvency practitioner as well as the former directors, is due to take place next week – a big step forward.
Crucially, if your company is now dissolved, it can participate in the FCA review process in its own name. If your company is in administration or liquidation, title to any claim in the FCA review process remains with the administrator or liquidator. However, the FCA have issued a directive to banks that they must write to the insolvency practitioner and additionally to the “customer” (the former directors of the company) inviting participation in the review process. More Fact finding Meetings for these companies should follow as a result of these measures.
But is the success of securing participation in fact Finding Meetings for insolvent companies somewhat pyrrhic if any “in principle” redress is simply going to be captured by the bank in any event? For some customers, the answer will be a very clear “no” if their objective was to demonstrate that a wrong was done to their company. Reputational issues may also be on the line where a company has gone bust, and an in principle award confirming that the company was missold may help with that. Jon Welsby believes for many former directors, the process of claiming through the review process is therapeutic and a positive finding of misselling may help some to clear up reputational issues and move on with their life.
For many however, the desire to see justice done comes with a clear commitment to achieving secure financial redress. Is this achievable? When asked if the review process would be able to turn the clock back and put back now insolvent companies in the (solvent) position they would have been in but for the swap, the FCA indicated that such an outcome was “not impossible”. All will depend, however, on the detail which the company is able to present to demonstrate that but for the swap the company would have remained solvent and would not have gone under.
So how much detail do you need to show that the cost of the swap was the crucial factor in the company’s insolvency? Realistically it will be extremely difficult to demonstrate this in a clear, analytical and objective way without forensic accountancy input – a process which was described in our earlier blog on consequential loss. However, where a company and its directors can clearly show that the cost of a swap clearly resulted in the company becoming insolvent, then according to the FCA, their argument to be put back in the position they were in must stand at least a chance.
A final thought – Bully banks are encouraging their members from insolvent companies to ask the bank to step aside in any redress award process – assuming the bank are the only secured creditor, this would result in any payment being distributed to the ordinary creditors (in many cases these will include the directors themselves). This seems fair particularly where the cost of the swap has been a significant factor in the company’s insolvency. But the crucial question is whether the banks will agree to do the decent thing. This remains to be seen.
If your company has gone into liquidation and you were missold a swap, contact us and we can look at ways in which we can assist. We offer a free no commitment meeting to explore the best way to help.
Partner and Head of Dispute Resolution