The Corporate Insolvency and Governance Act 2020 introduces a range of changes to UK insolvency law of a magnitude not seen since the reforms of the Enterprise Act 2002. One of the reforms included in the Act is a wide ranging prohibition on the operation of termination clauses in contracts for the supply of goods and/or services where the counterparty enters a relevant insolvency process.

What do the provisions do?

Under the new provisions, suppliers will be prevented from:

The outbreak of coronavirus COVID-19 represents one of the most significant global public health crises in recent memory and is causing major disruption and unprecedented volatility in markets, economies and businesses. With such great social and economic uncertainty, it is inevitable that existing financial arrangements will be affected and asset-based lenders (ABLs) are not immune to this. They are, however, uniquely positioned – given the flexibility of the products they offer – to react to the ever-changing economic landscape.

Case Study: US-based unsecured creditor proactively protects its position and recoveries from the liquidation of its UK distributor

When a company enters into an insolvency process in the UK, the position of unsecured creditors is typically one of uncertainty. Ranking fifth1 in the insolvency payment waterfall, unsecured creditors frequently find themselves out of the money. Even in cases where there are sufficient realizations to make a distribution to unsecured creditors, they may receive only a minimal amount in respect of their outstanding debts.

Shortly before insolvency, financially distressed companies often receive monies which appear "morally" to be due to third parties, such as customer deposits or monies due to be received by the company as agent on behalf of its principal. If the company then enters an insolvency process, can it keep the money, leaving the customer/principal with no more than the right to prove, as an unsecured creditor in the insolvency? Or should the money be protected by some form of trust in favour of the "morally entitled" recipient?

The Commission has published its rating system and an advice note to operators on the requirements to segregate customer funds and disclose to customers the level of protection offered in the event of insolvency.

This ratings category must be included in operator’s terms and conditions by 31 December 2014.

The UK Restructuring Plan took its first foray down the well-trodden path of lease restructuring over the last week. The Restructuring Plan has been used through to court sanction in five cases so far: however, none has sought to compromise landlord claims, the preferred tool for which has until now been the CVA.

The Corporate Insolvency and Governance Act received Royal Assent on 25 June 2020. It implements the measures announced by the UK government on 23 April 2020 to safeguard against aggressive rent collection tactics. It follows the ban on forfeiture for non-payment of rent contained in the Coronavirus Act 2020 which came into effect on 25 March 2020. In this article, DLA Piper’s experienced Real Estate and Restructuring lawyers assess the debt collection restrictions contained in both Acts.

The Dutch legislator has published a bill for a new pre-insolvency tool, which seeks to combine the best of the UK scheme of arrangement and the US Chapter 11 procedure. The new legislation will be formally called 'The Act regarding the binding approval of debt restructuring agreements'. Among restructuring professionals it is already widely referred to as the WHOA (Wet homologatie onderhands akkoord) or the "Dutch Scheme". Currently, the WHOA is pending final approval by the Dutch parliament and is expected to enter into force on 1 July 2020.

There have been a number of smoke signals in the last few months around the increase of consumer debt in the UK and a focus on those firms providing consumer credit across the credit spectrum but particularly in the "sub-prime" or "near-prime" space.

Since the credit crunch, a number of consumer credit businesses have stepped in to fill a gap in the lending market. They give sub-prime or near-prime borrowers, who may find it difficult to obtain credit from traditional sources, with high-cost, short-term credit - instant access to funds.

On the Horizon

Welcome to the second edition of the On the Horizon newsletter - a regular update on upcoming cases and anticipated regulatory developments by the DLA Piper Banking and Finance Litigation team.

AUTUMN 2016

Cases to watch