Although the contentious background to the applications to restrain the presentation of two winding up petitions heard together in (but only listed singularly as) the case of Shorts Gardens LLB v London Borough of Camden Council [2020] EWHC 1001 (Ch) is somewhat unusual, these cases nonetheless raise some interesting points of principle which may be used by the courts in determining whether it is appropriate to restrain or dismiss a winding up petition due to COVID-19.
Insolvency intersected with the UK government’s response to the coronavirus pandemic in an application to the High Court by the administrators of restaurant chain Carluccio’s. Considering the government’s Coronavirus Job Retention Scheme (the “Scheme”), the court held that:
This client alert summarises the recent announcement by the UK government concerning reforms to UK insolvency law to help struggling businesses, being:
As COVID-19 continues to cause widespread economic disruption, the UK government has announced lending measures to support struggling businesses. This alert summarises:
- the measures available;
- key legal considerations for directors hoping to take advantage of new debt; and
- practical steps directors can take to protect themselves from personal liability.
This alert is relevant to directors of disrupted, stressed, and distressed companies who are considering additional borrowing.
What has the government announced?
As businesses and companies in the UK face an uncertain few weeks and months with unprecedented pressures, it can be easy for directors to panic and not know where to turn.
To assist in decision-making, we give a reminder of the law in this area, and some signposts for those seeking help.
In this briefing, we give a short reminder of statutory duties owed by UK directors under the Companies Act 2006, the potential risks of continuing to trade while possibly insolvent, and actions that should be taken in order to mitigate those risks.
Directors’ duties
Hot on the heels of our April 2020 article on the proposed reintroduction of the Crown preference, Parliament has recently approved legislation that will increase the ring-fenced amount available to unsecured creditors on an insolvency of a company from £600,000 to £800,000.
In our last article, which can be found here, we reported on the government’s intention to give HMRC priority in the recovery of certain debts (including VAT, PAYE, Employee NICs, and Construction Industry Scheme deductions ) in insolvency proceedings.
In the landmark decision in Re Systems Building Services Group Limited [2020] EWHC 54 (Ch), ICC Judge Barber held that the duties of a director survive the insolvency of a company.
Case: Lehman Brothers International (Europe) (in administration) [2018] EWHC 1980 (Ch), Hildyard J (27 July 2018)