The Sturge Names' Action Group (Snag), which separately plans to issue writs against Sturge syndicates next month, has written to shareholders of Sturge, urging them to block the scheme at the company's annual general meeting on Tuesday. If 25 per cent of shareholders voted against the scheme, it would be blocked.
Sturge, however, denied that the scheme could hurt the Names. James Macdonald, finance director, said the proposed scheme of arrangement to set up the new holding company must be approved in the London High Court next month and any activity that prejudices creditors would be vetoed.
Rebel Names were acting against their own interests, Mr Macdonald said. The new holding company, Ockham Holdings, would enable the group to expand without being hampered by Sturge's litigation problems. Expansion would be in the interests of underwritingNames as well as shareholders, he claimed.
According to the scheme, Sturge would become a subsidiary of Ockham. The new holding company would enable the "creation or acquisition of new businesses" and would "not itself be directly be affected by any of the litigation relating to Lloyds".
However, it would be a "relatively simple matter" for the assets of Sturge to be "transferred up" into Ockham, said Mr John Rew, Snag chairman, in the letter sent to Sturge's shareholders this month.
The assets would then be "outside the reach of the action group litigation, since Ockham did not exist at the time of the alleged underwriting misdeeds", Mr Rew said.
In his letter, Mr Rew added that Sturge has already taken steps to remove the assets of some subsidiaries that might be the target of litigation. "This latest move may well be a more sophisticated version of these actions," he argued.
A dispute of this kind is not uncommon, said Dr David Tiplady, partner of London solicitor DJ Freeman. Generally, however, if a company makes a disposition of assets then becomes insolvent in the next five years, the disposition can be challenged by a prejudiced party and reversed by the court, he said.
If the disposition of assets was made deliberately to defeat creditors, the five-year time limit would not apply, but this is tantamount to fraud and could be very hard to prove, Dr Tiplady concluded.
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