On 18 March 2021, the UK Government published its long-awaited white paper on restoring trust in audit and corporate governance.
This follows a series of high-profile audit errors and major corporate collapses, including those of BHS in 2016 and Carillion in 2018, which led the Government to commission three independent reviews into different aspects of the UK’s audit, reporting and corporate governance systems.
The white paper targets large listed and AIM-listed companies, and large private companies where there is a public interest, and primarily focuses on:
In March 2020, the UK government announced that changes will be made to enable UK companies undergoing a rescue or restructure process to continue trading, giving them breathing space that could help them avoid insolvency.
The legislation implementing this has now been laid before Parliament in the Corporate Insolvency and Governance Bill. This includes measures intended to tide companies through the COVID-19 pandemic, as well as far-reaching wholesale reforms to the UK’s restructuring toolbox.
Snapshot
The Supreme Court handed down its long-awaited judgment today in the Nortel/Lehman case on where a contribution notice (CN) or financial support direction (FSD) issued by the Pensions Regulator (TPR) on a company that is already in insolvency proceedings (eg administration) ranks in the order of priority of payment.
In our last blogpost (here) we reported how the court had, for the first time, exercised its power under s. 901C(4) Companies Act 2006 to exclude a company’s members and all but one class of its creditors from voting on a restructuring plan under Part 26A. The facts of this case are set out in more detail in that blogpost.
On 26 June 2020 the UK Corporate Insolvency and Governance Act 2020 (the Act) came into force. The Act marked the most significant insolvency reforms in a generation – introducing new permanent restructuring tools (such as the restructuring plan and the moratorium). It also introduced two temporary measures (see our blog post here) specifically dealing with the impact of COVID-19 on companies:
As the business world starts to count the cost of the COVID-19 pandemic and the government measures taken to contain it, attention is turning to the tools available to help companies that have been financially impacted.
Many companies are deferring payments to conserve liquidity, raising difficult questions around directors’ duties and leading to an immediate focus on how to protect the business from resulting creditor action.
Summary
The Court of Appeal’s judgment in The Trustees of the Olympic Airlines SA Pension & Life Insurance Scheme v Olympic Airlines SA [2013] EWCA Civ 643 has clarified what is required to fall within the definition of an ‘establishment’ for the purposes of the EC Insolvency Regulation (the Insolvency Regulation).
Summary
For the first time, the court has exercised its power under s. 901C(4) Companies Act 2006 to exclude a company’s members and all but one class of its creditors from voting on a restructuring plan under Part 26A. The court was satisfied that only one class of creditors had a genuine economic interest in the company and noted that “this was not a marginal case”.
Key drivers for the court’s decision (see more detail below) were:
The Corporate Insolvency and Governance Act 2020 (the Act) introduced significant changes to insolvency law, including permitting companies to propose a “restructuring plan”. The restructuring plan offers a flexible option for companies that sponsor defined benefit pension schemes to compromise their obligations to creditors and, potentially, to the pension scheme itself.
The English Court of Appeal has handed down its judgment in the Debenhams case, on which we acted. A copy of the judgment can be downloaded here. This upholds the decision of the High Court, which followed the earlier decision in Carluccio’s.