A recent High Court case (Fairhold Securitisation Limited v Clifden IOM No 1 Ltd) has affirmed that in debt issuances involving a trustee, noteholders have only limited rights to take direct enforcement action. The case confirmed that:
- trustees do not need to act on holders’ instructions until holdings have been verified;
- on receipt of instructions, a trustee is not bound to act until it has had a reasonable time to verify holdings, review instructions, take advice and obtain satisfactory indemnification;
- where a trustee holding a floating charge is obliged to take enforcement action, its failure to do so does not entitle noteholders to step into the shoes of the trustee and appoint administrators.