As we see more businesses having to close doors or adapt to a new set of rules, we set out a summary of some of the issues we anticipate for those needing to shut down but preserve their businesses at least until the lockdown is over. We will produce a more detailed client alert as matters develop although one message is clear – employers, employees, suppliers and customers are facing unique challenges and the best way to survive is to identify the issue, understand the options, and engage with pragmatism.

Employees

Since the news of Thomas Cook’s demise a lot of focus has been on its travel customers. But beyond repatriating stranded holiday makers, the impact of large scale insolvencies such as Thomas Cook, Carillion and British Steel can be far reaching.

Those relying on the likes of Thomas Cook for business may also face financial distress as the impact of its insolvency ripples down the supply chain. Potentially impacting suppliers of goods and services, those who relied on Thomas Cook’s business outside of the UK, employees and landlords.

It was a painful outcome for the administrator of ARY Digital UK Limited (“ARY”) when he was found in breach of duty and liable to pay £743,750.

The case of Brewer and another (as joint liquidators of ARY Digital UK Ltd) vIqbal [2019] EWHC 182 (Ch) reminds office holders of the importance of understanding what assets they are selling, ensuring that correct marketing processes are employed and obtaining proper valuations.

Administrators are statutorily entitled to require a receiver to vacate office (paragraph 41 Schedule B1 Insolvency Act 1986 (“Schedule B1”)). In Promontoria (Chestnut) Ltd vCraig and another [2017] EWHC 2405 (Ch) they did just that, taking steps to remove existing receivers not long after their appointment, claiming the action to be in the interests of all the creditors. On the facts, that decision was not only unreasonable but costs were also awarded personally against the administrators.

Brief facts and arguments

Smile Telecoms Holdings Limited (“Smile”), a Mauritian company, has recently had its second restructuring plan sanctioned by the High Court in England. The case contains some important markers for those involved in restructuring plans, particularly those plans which involve international elements or which seek to prevent out-of-the-money creditors from voting on the plan.

Background

VE Vegas Investors IV LLC and others vs Shinners and others [2018] EWHC 186 Ch

Background

The applicants were creditors of VE Interactive Limited (In administration) (“VE”). VE encountered financial difficulties and its directors sought insolvency advice from insolvency practitioners at Smith and Williamson (“S&W”) and appointed them to advise on and effect a pre-pack sale of VE’s business and assets.

On 5 April 2022, the UK government published the first review of the Insolvency (England and Wales) Rules 2016 (the Rules) (the Report). It is evident from the Report that many respondents took the opportunity to raise issues faced in practice, not just with the Rules, but with the operation of the insolvency legislation in general.

In the recent case of Cherkasov & others v Olegovich [2017] EWHC 756 (Ch) the English courts considered the public policy exception set out in Article 6 Cross Border Insolvency Regulations 2006 (CBIR) and whether security for costs could be ordered against the official receiver of a Russian company (who had obtained recognition in England under CIBR) when he applied for an order for the production of evidence by some of the former managers of a Russian company under section 236 of the Insolvency Act 1986 (IA).

In Minor Hotel Group MEA DMCC v Dymant & Anor [2022] EWHC 340 (Ch), is the first reported High Court decision considering a contested moratorium since the new Part A1 moratorium ("moratorium") was introduced in 2020, in which the monitors successfully opposed an application by the parent company's secured creditor to remove the monitors and end the moratorium.

The English courts have recently wrestled with the Cross Border Insolvency Regulations 2006 (“CBIR”) in a case about the lifting of the automatic stay on proceedings against Korean company STX Offshore & Shipbuilding Co Ltd