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MT Realisations Ltd (in liq) v Digital Equipment Co Ltd

[2003] 2 BCLC 117

Case summary last updated at 23/01/2020 15:50 by the Oxbridge Notes in-house law team.

Judgement for the case MT Realisations Ltd (in liq) v Digital Equipment Co Ltd

Purchase acquired a target company from the vendor. Vendor assigned purchaser the benefit of an on-demand loan due from the target company; purchaser agreed to pay vendor for the assignment of loan. Purchaser was later unable to make payment to the vendor, so agreement was later restructured – target was made to make payments directly to the vendor, and this was set-off against the money still owed to the vendor by the purchaser under the loan assignment. Was argued that set-off of money owed by purchase was unlawful financial assistance. Held:
 
·       Was no financial assistance
·       For there to be financial assistance, something has to be given to someone that he does not have already
Ø  here, purchaser had not been given any new rights against target company
Ø  rather, it had already acquired the right to a loan payable by target company
–       had purchaser wished to use this to pay off the vendor for the loan assignment, could have simply demanded payment in full at any time
Ø  by making loan payable to vendor and setting this money off against money due to vendor under loan assignment, was simply short-circuiting the process
·       Thus purchaser was simply exercising a pre-existing legal right
Ø  this cannot constitute financial assistance

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