CORRAL PETROLEUM HOLDINGS AB (PUBL) - Preem

English insolvency laws differ from U.S. insolvency laws and your rights as our creditor may not be as strong underEnglish insolvency laws, which, in the event of our insolvency, may result in your claims remaining unsatisfied.We conduct some of our business on a regular basis in England and Wales. On that basis, an English court maybe likely to conclude that we have a “sufficient connection” with the United Kingdom and will have the requisitejurisdiction to exercise its discretion as to whether it should sanction a scheme of arrangement under Part 26 of theCompanies Act 2006 (UK) pursuant to which we enter into a compromise or arrangement with is creditors. A scheme isgoverned by English company law. English company law may differ from U.S. company law and your rights as ourcreditor may not be as strong under English company law as they may be under U.S. company law. It is also possiblethat we are said to have our “centre of main interest” (“CoMI”) in the UK, and may pursue a company voluntaryarrangement under Part I of the Insolvency Act 1986.The relevant English insolvency statutes empower English courts to make an administration order in respect of acompany with its CoMI in England. An administration order can be made if the court is satisfied that the relevantcompany is or is likely to become “unable to pay its debts” and that the administration order is reasonably likely toachieve the purpose of administration. In addition, the holder of a “qualifying floating charge” over the assets of acompany with its CoMI in England may appoint an administrator out of court, provided such floating charge has becomeenforceable and the company need not necessarily be insolvent. In this case the prospective administrator must besatisfied that the purpose of administration is reasonably likely to be achieved. A company with its CoMI in England orthe directors of such company may also appoint an administrator out of court, although the company must be unable topay its debts at the time of such appointment. The purpose of an administration is comprised of three parts which mustbe looked at successively: rescuing the company as a going concern or, if that is not reasonably practicable, achieving abetter result for the company’s creditors as a whole or, if neither of those objectives are reasonably practicable, and theinterests of the creditors as a whole are not unnecessarily harmed thereby, realising property to make a distribution tosecured or preferred creditors.The rights of creditors, including secured creditors, are particularly curtailed in an administration. During theadministration, no proceedings or other legal process may be commenced or continued against the debtor, except withleave of the court or consent of the administrator. In particular, upon the appointment of an administrator, no step maybe taken to enforce security over the company’s property, except with the consent of the administrator or the leave of thecourt.In addition, an administrator is given wide powers to conduct the business and, subject to certain requirementsunder the Insolvency Act 1986, dispose of the property of a company in administration.However, the general prohibition against enforcement by secured creditors without consent of the administratoror leave of the Court, and the administrators’ powers with respect to floating and other security, do not apply to anysecurity interest created or arising under a financial collateral arrangement within the meaning of the Financial CollateralArrangements (No. 2) Regulations 2003 (UK). A financial collateral arrangement includes (subject to certain otherconditions) a pledge over shares in a company, where both the collateral provider and collateral taker are non-naturalpersons.Certain preferential claims, including unpaid contributions to occupational pension schemes in respect of thetwelve month period prior to insolvency, and unpaid employees’ remuneration in respect of the four month period priorto insolvency, will, while ranking behind the claims of holders of fixed security, rank ahead of floating charges underEnglish insolvency law. In addition, a prescribed part of floating charge realisations (being 50% of the first £10,000 ofnet realisations and 20% of the net realisations hereafter, up to a maximum of £600,000) is required to be set aside for thebenefit of unsecured creditors and, as such, ranks ahead of the relevant floating charge.The English court may be likely to determine that it has jurisdiction to wind up our business as an unregisteredcompany provided that the English court is satisfied that there is no other more appropriate jurisdiction for the windingup to take place and there will be a reasonable benefit to the creditors from the winding up in the English jurisdiction.The winding-up of a company by the English court would involve the appointment of a liquidator under the InsolvencyAct 1986 (UK).Under English insolvency law, a transaction entered into by a company may be invalid or voidable in certaincircumstances. The liquidator of a company may, among other things, apply to the court to unwind a transaction enteredinto by a company, if such company were unable to pay its debts (as defined in Section 123 of the UK Insolvency Act1986) at the time of, or as a result of, the transaction and enters into liquidation proceedings within two years of thecompletion of the transaction. A transaction might be subject to a challenge (pursuant to Section 238 of the UKInsolvency Act 1986) if it was entered into by a company “at an undervalue,” that is, it involved a gift by the company,or the company received consideration of significantly less value than the benefit given by such company. A courtgenerally will not intervene, however, if a company entered into the transaction in good faith for the purpose of carryingon its business, and that at the time it did so there were reasonable grounds for believing the transaction would benefitsuch company. We believe that the Senior Secured Notes were not issued on terms that would amount to a transaction atan undervalue, and further, that the offering is in good faith for the purposes of carrying on our business, and that there10