On 28 March 2020, the Business Secretary, Alok Sharma, announced new insolvency measures to support companies under pressure as a result of the COVID-19 outbreak. In summary, the government is due to: (i) implement the landmark changes to the corporate insolvency regime that were announced in August 2018 (as discussed in Weil’s European Restructuring Watch update on 7 September 2018); and (ii) temporarily and retrospectively suspend wrongful trading provisions for three months.
Proposed Changes to the Corporate Insolvency Regime
Background
On 6 March 2020, the restructuring of Doncasters Group's 1.22 billion funded debt was completed. Following a successful non-core disposals program, the Doncasters Group (a leading worldwide supplier of high quality engineered components for the aerospace, industrial gas turbine and specialist automotive industries) operates from 12 principal manufacturing facilities based across the United Kingdom, the United States, Germany, Mexico and China.
Introduction
Earlier this month, the English Insolvency and Companies Court (the “ICC”) made a limited civil restraint order against a shareholder who had repeatedly sought, unmeritoriously, to challenge the 2017 restructuring of Paragon Offshore plc (in liquidation) (“Paragon”) (Hammersley v Soden & Ors [2022] EWHC 223 (Ch)).
On 11 July the government published draft legislation for the Finance Bill 2020. We set out below details of the key insolvency measures in the proposed legislation. The draft legislation is open for technical consultation until 5 September 2019, but the principles of the legislation are not expected to change.
Overview
The reintroduction of Crown Preference
Mr Justice Snowden’s recent judgment sanctioning the Virgin Active restructuring plans is significant for several reasons. Not only is it the first judgment to consider the cram down power of the 2006 Companies Act, but it is only the third instance that the cross-class cram down mechanism has been used. It is also the first time it has been used to cram down classes of dissenting landlords.
The below is a quick snapshot of three recent tax-related developments in the insolvency and restructuring sphere.
Farnborough – appointment of a receiver and tax grouping
On Wednesday 24 March, the government confirmed that it will be extending the current temporary restrictions on statutory demands and winding-up petitions and the temporary suspension of directors’ liability for wrongful trading put in place under the Corporate Insolvency and Governance Act 2020, until 30 June 2021.
The extensions, set out in the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021, laid before parliament on 24 March, will come into effect on 26 March 2021.
RESTRUCTURING FOCUS ON 2019
JANUARY 2019
RESTRUCTURING: FOCUS ON 2019
CONTENTS
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VIEW FROM THE TOP NEW MONEY CONSIDERATIONS SOMETHING FOR ALL INVESTORS? THE INTERCREDITOR MINEFIELD LESSONS FROM CLAIRE'S STORES GOVERNANCE THE SPECTRUM OF OPTIONS CHAPTER 11 FOR THE UK? BREXIT AND UK INSOLVENCY REFORM EU INSOLVENCY REFORM: A CHANGING LANDSCAPE INDEPENDENT RECOGNITION WEIL CONTACTS
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2 RESTRUCTURING: FOCUS ON 2019
VIEW FROM THE TOP
RESTRUCTURING: FOCUS ON 2019
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On 24 February, the Government published draft regulations that, if implemented, will impose new restrictions on pre-pack administration sales to connected parties. For all `substantial disposals' (which will include `pre-pack' sales) to connected parties, taking place within eight weeks of the administrators' appointment, the administrators will either need creditor consent or a report from an independent `evaluator'.
Context
Over the last two years, BEIS has issued a number of consultations either focussed on, or touching upon, corporate governance issues in insolvency or the broader insolvency framework.