A Russian tycoon, Sergei Pugachev, has been served with an order freezing $2 billion of his assets by the UK High Court in an insolvency matter. This will mean that he cannot sell his properties or cars, or spend the money in his bank accounts.
A liquidator has been appointed to deal with the now insolvent Russian bank Mezhprombank. The liquidator believes that Mr Pugachev owned or controlled the bank and therefore should be held liable for its insolvency. It is alleged that Mr Pugachev transferred money from the bank to his private accounts when it was already insolvent.
Freezing orders are temporary injunctions that stop a party from disposing of or dealing with their assets. This will normally be to keep the assets safe until a court order can be obtained. Bank accounts can be frozen, so the money cannot be spent. Car and properties can be protected so that they cannot be sold, or anything done to diminish their value. It can apply to individuals or to companies and will prevent either from dissipating their assets. The order can apply to UK or worldwide assets.
A freezing injunction is an extreme measure and the court will only order it if they are satisfied that it is really necessary in the circumstances. It can affect a party’s creditworthiness and is likely to affect both their personal life and their ability to continue with any commercial matters.
Speedy action is essential so that an order can be granted before any assets are dissipated, and before the money is moved or spent or the properties sold. Mr Pugachev will be allowed access to a set allowance to live on, and money for legal fees. If the order is broken or disobeyed then he will be held in contempt of court and can be fined, imprisoned or his assets can be seized.
The freezing injunction will end after the liquidator has investigated the matter of the bank’s insolvency, and when the court decides on what orders to make. We wait to hear what will happen next!
By Miranda Jenkins