Insolvency

The pari passu principle applied to any distribution, whether or not it was expressly triggered by the relevant insolvency procedure. It was enough that the effect of the relevant contractual or other provision was to apply an asset belonging to the debtor at or following the commencement of the insolvency procedure in a non-pari passu way. Contracts conflicting with the pari passu principle were void without any need to show that their purpose was to avoid a pari passu distribution.

The pari passu principle served a purpose and should come into play only if the purpose of the insolvency procedure was to effect a distribution. In the case of liquidation or bankruptcy, that was when the company entered liquidation or the debtor was declared bankrupt. In the case of administration, that was when the administrator gave notice of the proposed distribution. It was settled law that the anti-deprivation rule was aimed at attempts to withdraw an asset on bankruptcy or liquidation or administration, thereby reducing the value of the insolvent