Resolving the MS Fashions 'Paradox'
World Bank Global Initiative on insolvency and Creditor/Debtor Regimes; University College London (UCL) - Faculty of Laws; Chambers of Michael Crystal QC
In the context of the decision of the House of Lords in Re Bank of Credit and Commerce International S.A. (No. 8)  AC 214, this short paper asks (i) whether the existence of a charge in one's favour over one's own indebtedness (a 'charge-back') destroys the mutuality necessary for insolvency set-off to operate, and (ii) whether the assets of the insolvent company are notionally collected before the set-off may operate. Both questions are answered in the negative. The paper concludes by suggesting that the reasons given by the courts in justifying the very existence of insolvency set-off also argue in favour of allowing it to operate in the appropriate case, even if there is a charge-back.
Number of Pages in PDF File: 8working papers series
Date posted: May 21, 2004
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