The Corporate Insolvency and Governance Act received royal assent on 25 June 2020 and comes into force immediately.

The Act introduces a range of new corporate restructuring tools and suspends, temporarily, parts of the existing insolvency regime. The purpose of this note is to update you on two key aspects of the Act: the moratorium on legal action and the temporary changes in relation to statutory demands and winding-up petitions.

Moratorium on legal action

Clearly there are some major economic challenges ahead. Many businesses may be able to withstand the challenges ahead but it may very well be that their trading counterparties (whether suppliers, customers or other stakeholders) will not. Whilst these times can represent an opportunity for some, such as potential acquirers (whether of businesses, assets or distressed debt), in most cases, the climate represents a threat to businesses.

The Corporate Insolvency and Governance Bill (the "Bill") was published on 20 May 2020. The Bill introduces a new type of ‘moratorium’ whereby eligible companies can take 40 days to restructure without the threat of enforcement action from creditors.

The Corporate Insolvency and Governance Bill 2019-21 (the “Bill”) published on 20 May 2020, had its third reading on 3 June 2020. This briefing focuses on the proposed changes to shareholder meetings and Companies House filing deadlines. For the purposes of this briefing, the “Relevant Period” began on 26 March 2020 and ends on 30 September 2020.

1. Flexibility for holding shareholder’s meetings.

Market conditions and Covid-19

The Covid-19 pandemic and the response to it, including global lockdowns, has caused substantial disruption to business operations and trade which has resulted in significant cash flow and financial challenges for many businesses. As a result, in a number of cases, financing covenants have been breached which have triggered defaults under financing arrangements.

Shenzhen Everich Supply Chain Co, Ltd (in Liquidation in the Mainland of the People's Republic of China) [2020] HKCFI 965 (date of judgment: 4 June 2020)

For the second time the Hong Kong Court has recognised a PRC winding-up proceeding and granted assistance to the administrator of a PRC company appointed by a PRC Court. The Hong Kong Court also granted the administrator an express right to take control of the company's subsidiaries in Hong Kong.

Background

One of the largest bankruptcy orders ever made in the English courts (in the region of £870 million) has been set aside to allow a creditors’ meeting to take place in order to consider an individual voluntary arrangement. In (1)Gertner (2) Laser Trust v CFL Finance Ltd [2020] EWHC 1241 (Ch), Mr Justice Marcus Smith has held that unless a breach of the good faith rule can be established, it is inappropriate for the court to refuse an application supported by a majority of creditors to stay a bankruptcy petition.

Introduction

Editor, Jonathan Spearing

Welcome to the ninth edition of Commodities in Focus (CIF); our bulletin for clients engaged in the production, trading, carriage, storage and financing of commodities.

Recent months have brought unprecedented challenges to businesses, with no sector immune to the economic repercussions of the pandemic. Yet despite headline news of certain high-profile restructurings and insolvencies, such as Virgin Atlantic, Debenhams, and Edinburgh Woollen Mill, it seems the emergency measures implemented by the UK Government have, to a degree, staved off wide spread economic collapse that may otherwise have been inevitable.

This note considers how the recent changes to UK insolvency law introduced by the Corporate Insolvency and Governance Act 2020 ("CIGA") might affect those involved in the sale and purchase of commodities. In particular, it looks at the impact of Section 14 of CIGA on contracts for the supply of goods or services, and on the typical rights and remedies of the seller / supplier under such contracts.