Limited liability is one of the fundamental concepts in our understanding of company law. Even people who know very little about the working of limited companies may know that directors and shareholders are not liable for the debts of their companies. For the last 160 years, the protection of limited liability has been a key factor in economic growth and commercial activity as it has allowed entrepreneurs to speculate and take risks that they might not have been willing to do if the risk of personal liability overshadowed their decision-making.

One of the main differences in insolvency law between Scotland and England & Wales relates to the challengeable transactions regime under the Insolvency Act 1986.

In both jurisdictions, transactions that are entered into before a formal insolvency process begins can be attacked if they are detrimental to the creditors of the insolvent company. However, although both systems use similar language and address similar concerns, the law in the two jurisdictions is different, most notably with different time periods and defences to a challenge.

The pandemic has created a chaotic business environment in which it is has at times been practically impossible to make any definitive plans. Lockdown measures have changed regularly, legislation has been introduced and extended and the rules for conducting business (when it is even possible to trade) have varied across the UK and have at times been criticised by those most harshly effected as being arbitrary and unscientific. All of this has often happened at very short notice.

As a result of temporary provisions that have been in place since March 2020*, during the Covid period directors have been broadly protected from the risk of personal liability for wrongful trading.  Those temporary provisions are due to end on 30 June, 2021 and as a result, the law on wrongful trading again becomes highly relevant.

We are hopefully now beginning to move out of the various lockdowns and restrictions that have been put in place to deal with the pandemic.

As things begin to return to some form of "normality", businesses might begin to feel some sort of relief. However, the inevitable consequence of normality returning is that some of the temporary rules that have been put in place to assist businesses through these difficulties will fall away.

R3, trade body for insolvency and restructuring accountants, said the first quarter of 2021 had seen a sharp fall in companies and individuals becoming bankrupt.

Corporate insolvencies in January to March fell by 31 per cent on the preceding quarter.

The figure was 63 per cent lower than the first quarter of 2020.

In June 2020, the Corporate Insolvency and Governance Act (the “CIGA”) introduced a new procedure to the restructuring toolkit in England & Wales, the Part 26A restructuring plan (the “Plan”, see further detail on CIGA in our article here). The Plan is similar to the well-tested English law scheme of arrangement (the “Scheme”), and the English courts have so far relied on the wealth of Scheme case law to guide them in deciding whether to sanction a Plan.

I had an interesting conversation this week with the Evening Standard, considering the prospect of further company voluntary arrangements, or 'CVAs' on the UK high street as the year progresses.

The vast majority of ‘bricks and mortar’ retailers, as well as hospitality venues, are desperately seeking ways to cut their fixed costs to improve their chances of riding-out the pandemic. Leasehold obligations are often among the most significant of those fixed costs, and the CVA offers a well-tested route to compromise those obligations.

As always, there has been a lot going on in insolvency.  We have highlighted below a few of the more important developments that we have seen in a very busy 2020 for insolvency lawyers. 

Re Tokenhouse VB Ltd (Formerly VAT Bridge 7 Ltd) [2020] EWHC 3171 (Ch)

The challenges facing the businesses of the United Kingdom at the start of 2021 are perhaps greater than any of us have seen in our lifetimes. In addition to the economic consequences of the restrictions on daily life imposed to counter Covid-19, we are now seeing the effects of the exit of the UK from the EU with businesses having had little time to get up to speed on the new regime.