On 25 June 2020, the Corporate Insolvency and Governance Bill (the “Bill”) received Royal Assent and on 26 June 2020 CIGA came into force. The restructuring team in Mayer Brown’s London office have previously commented on the different elements of the Bill in a series of blog posts and podcasts. CIGA was swiftly followed by the introduction of The Pension Protection Fund (Moratorium and Arrangements and Reconstruction for Companies in Financial Difficulty) Regulations 2020 (the “Regulations“), which came into force on 7 July and were subsequently amended yesterday on 23 July. Now that CIGA is in force, we take a closer look at the legislation from a pensions perspective.

Continue Reading The UK Corporate Insolvency and Governance Act 2020 (“CIGA”) from a Pensions Perspective

As discussed in earlier posts, substantial uncertainty exists over whether companies in bankruptcy are eligible to pursue funding pursuant to the SBA’s Paycheck Protection Program, or PPP, which was established by the CARES Act to support small businesses by offering SBA-guaranteed loans on advantageous terms. Litigation has ensued, with jilted companies looking to restructure in

The Corporate Insolvency and Governance Bill (“Bill”) published on 20 May 2020 proposes to introduce a number of significant reforms to UK restructuring and insolvency law . The scope of the Bill is wide ranging and includes measures to protect companies in financial difficulty as a result of the current pandemic. Several of the provisions contained in the Bill will have particular impact on the landlord and tenant relationship during the current COVID-19 crisis, which is the focus of this article.

Continue Reading The Corporate Insolvency and Governance Bill – Impact on Commercial Property

The Corporate Insolvency and Governance Bill 2020 (the “Bill“) introduces a flexible restructuring compromise or arrangement for companies in financial difficulty (the “Restructuring Plan“). It is proposed that the legislation governing the Restructuring Plan will sit alongside the schemes of arrangement and be included in a new Part 26A to the Companies Act 2006.

The Restructuring Plan will not apply to companies that are solvent with no risk of insolvency; rather it will only apply where two conditions are satisfied:

  • condition A: the company has encountered, or is likely to encounter, financial difficulties that are affecting, or will or may affect, its ability to carry on business as a going concern; and
  • condition B: a compromise or arrangement is proposed between the company and (a) its creditors, or any class of them; or (b) its members, or any class of them; and the purpose of the compromise or arrangement is to eliminate, reduce or prevent, or mitigate the effect of, any of those financial difficulties.

The Restructuring Plan may be proposed by the company, or its creditors, shareholders, liquidators or administrators. When the insolvency reforms were originally proposed, it was intended that the company be given exclusivity for a certain period to propose the Restructuring Plan. This exclusivity period would mirror the position in the US; however this is not included in the Bill, as drafted.

Continue Reading Restructuring Plan for Companies in Financial Difficulty – Changes Introduced by the UK Corporate Insolvency and Governance Bill

On 20 May 2020, the UK Government published the Corporate Insolvency and Governance Bill (“CIGB” or the “Bill”) which proposes several changes aimed at improving the chances of company rescue and better overall returns for creditors. One of the proposed changes is to restrict parties’ ability to exercise contractual termination rights where a company enters into an insolvency or restructuring procedure, meaning that for most suppliers and supply contracts a termination clause will be ineffective upon insolvency. This will align the approach in the UK with that of a number of other jurisdictions.

These clauses can be referred to as “ipso facto” clauses; ipso facto translating to ‘by the very fact’. This extrapolates to situations where a party seeks to terminate a contract by the very fact of insolvency.

Continue Reading Corporate Insolvency and Governance Bill – Restrictions Placed on the Exercise of Contractual Termination Provisions

On 20 May 2020, the UK government announced the Corporate Insolvency and Governance Bill (the “Bill”), introducing a mixture of permanent and temporary measures, the latter being in response to the financial challenges companies are facing as a result of the Covid-19 pandemic and lockdown. In the absence of extensive consultation with insolvency practitioners and industry experts, it remains to be seen how effective the measures will be in practice.

As anticipated, a new standalone moratorium, overseen by a “monitor”, has been introduced. The provisions largely mirror those put forward during the limited consultation in 2018 – the purpose being to provide a company with the breathing space to explore a rescue or restructuring of the business, which includes the newly introduced restructuring plan. It is not intended that the company has the form of rescue/restructuring in mind at the time the moratorium is applied for and the moratorium is not a gateway to any particular insolvency process. Notably, the moratorium enables the directors to remain in day to day control of the business and enables them to lead discussions regarding rescue and restructuring, albeit we expect that the monitor will provide invaluable knowledge and guidance in crafting the best form of rescue/restructuring. Current timelines indicate that companies may be able to seek this new moratorium as early as the end of June 2020.

Continue Reading Standalone Moratorium for Companies – Changes Introduced by the UK Corporate Insolvency & Governance Bill

While those in the restructuring and insolvency profession have been attempting to predict what the temporary suspension of the wrongful trading provisions proposed by the government might look like, the Corporate Insolvency & Governance Bill (the “Bill”) is not quite as anticipated.

Wrongful trading is a claim which can be brought (with personal liability) against a director, when a company has entered insolvent liquidation or administration and the director knew or ought to have concluded that there was no reasonable prospect that the company would avoid such proceedings, but nevertheless continued to trade the business. The defence to the claim is that the director took every step to minimise potential loss to creditors. This has understandably concerned many boards of directors during the COVID-19 pandemic and the consequent uncertainty and, therefore, any relaxation to enable confidence to trade is likely to be welcome.

Continue Reading Wrongful Trading – Temporary COVID-19 Changes Introduced by the Corporate Insolvency & Governance Bill

A winding-up petition is one of the most critical pieces in a creditor’s armoury where a debt remains unpaid. However, in these challenging times, the government clearly wants to provide a temporary shield to companies who are unable to pay their debts due to COVID-19.

Although the announcement by the UK Government on 23 April 2020 referred to the restrictions on issuing winding-up petitions as being part of further measures to “protect the UK high street from aggressive rent collection and closure“, the Corporate Insolvency and Governance Bill 2020 (the “Bill”) is not sector specific – the changes apply to any company that can be wound up and to any type of debt, not just rent liabilities.

Continue Reading Winding-Up Petitions – COVID-19 Temporary Restrictions Introduced by the Corporate Insolvency and Governance Bill 2020

On May 20, 2020, the UK Government published its much anticipated draft legislation (the Corporate Governance and Insolvency Bill) which aims to provide greater opportunities for company survival and better returns for creditors during and after the COVID-19 emergency. The Government intends to ask Parliament to expedite progress of the Bill.

If enacted in its current form, the Bill will introduce greater flexibility into the UK’s insolvency regime, allowing companies breathing space to explore options for rescue while supplies are protected, so that they have the maximum chance of survival. It will also temporarily suspend parts of insolvency law to support directors to continue trading through the COVID-19 pandemic without the threat of personal liability, and to protect companies from aggressive creditor action.

Continue Reading UK Government Publishes UK Restructuring and Insolvency Law Reforms

The CARES Act does not expressly provide that companies in bankruptcy are ineligible to receive PPP loans; the CARES Act is, instead, silent on the issue. Nonetheless, the SBA has taken measures to block companies in bankruptcy from receiving PPP loans—first, by requiring participating lenders to use an SBA-sponsored loan application that, on