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

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020 to provide $2.2 trillion to U.S. citizens and businesses afflicted by the COVID-19 outbreak, including $349 billion for financing “small businesses” under the Paycheck Protection Program or PPP.  Under the PPP, eligible small businesses are entitled

A court has approached the interplay between the Insolvency Act 1986 and the UK Government’s furlough scheme so as to encourage and support the rescue culture and facilitate access to the scheme by administrators. It ruled that:

  1. employees consenting only to be paid the capped amount provided under the scheme could receive no more than

On March 28, 2020[1], the UK Government announced that it will introduce new legislation extending the UK’s existing restructuring and insolvency laws to include:

  • a new company moratorium to give companies a breathing space from creditors while they seek to rescue or restructure;
  • protection of supplies to enable companies to trade during the moratorium; and
  • a new restructuring plan, binding on creditors.

The Government previously consulted on these changes in 2018 (the Consultation) but did not introduce them[2]. (In the Consultation it was proposed that: the moratorium would be standalone procedure, preventing the enforcement of security, legal proceedings and creditor action; supplies would be protected by prohibiting reliance on contractual termination clauses based solely on insolvency events; and the new restructuring plan would be based upon the existing scheme of arrangement but with cross-class cram-down available as a means of binding dissenting creditors.)

Continue Reading UK Government Announces Amendments to UK Insolvency Laws to Give Companies and Directors a Breathing Space While They Explore Rescue and Restructuring Options

With a slowdown in capital markets activity and sharply decreased economic activity, the pressures on borrowers (and therefore their lenders) are only going to increase in the near term.  In evaluating their positions, banks and administrative agents facing unsecured borrowers should be reminded of some important factors discussed in our Legal Update from August last

On Monday, 16 March 2020, the German Federal Ministry of Justice and Consumer Protection (Bundesministerium der Justiz und für Verbraucherschutz) announced that they are working on a legislative provision according to which the obligation to file for insolvency within three weeks following the occurrence of a reason for insolvency (i.e. illiquidity or over-indebtedness) would be suspended for such entities which face liquidity issues due to the Corona (COVID-19) pandemic.

Continue Reading German Federal Ministry of Justice and Consumer Protection Announced Suspension of the Obligation to File for Insolvency