Restructuring and insolvency issues are rarely out of the news at the moment, with a range of businesses seeking to adapt to the challenges of a post-COVID-19 world. You might have seen stories about struggling businesses going into administration or liquidation, or securing a company voluntary arrangement (CVA).

The High Court refused to appoint an examiner to New Look Retailers (Ireland) Ltd (New Look), where it transpired that it had sufficient funds to survive for a number of months but had not engaged substantively with creditors before applying for the appointment of an examiner.

Background

New Look operates 27 stores in Ireland, all of which are rented. It closed its stores 2 days before the Government mandated lockdown in March.

R3, the association of business recovery professionals, has produced a Standard Form Covid 19 CVA Proposal and accompanying Covid 19 Standard Conditions.

The Standard Form proposals are intended for use by SME companies, in each of the jurisdictions across UK that have been affected by Covid 19, to save time and cost and make CVAs more accessible to them.

Late in the evening on 30 July, the last day before its summer break, the Irish parliament (Oireachtas) passed the Companies (Miscellaneous Provisions) (Covid-19) Bill 2020. This is likely to be signed into law and commenced within two weeks.

Three of its provisions are particularly relevant to insolvency processes during the COVID-19 crisis.

Creditors’ meetings

The Office of the Director of Corporate Enforcement (ODCE) has provided guidance on its approach to directors of companies, made insolvent by the COVID-19 pandemic, who act in good faith on objective evidence in trying to rebuild their businesses.

The issue

The consequences of the COVID-19 crisis have made many businesses that were solvent, and will likely become solvent again, technically insolvent.

Notwithstanding the phased return to some level of normality, some businesses will continue to be significantly affected, particularly those in the hospitality sector where longer term challenges may be encountered due to social distancing requirements, consumer unease and the likely absence of international travel for many months, or perhaps even longer.

The Corporate Insolvency and Governance Bill (the “Bill”) has been laid before the UK Parliament today, Wednesday 20 May 2020.

The Bill, if passed, will implement some significant changes to UK insolvency law and at the same time effect a range of temporary measures to assist with corporate governance during the Covid-19 situation.

Moratorium for protection from creditors

As part of its response to the COVID-19 situation, Companies House has announced that it will accept the filing of statutory insolvency documents via emailed PDF attachments.

This measure applies to companies registered in Scotland, as well as England & Wales and is yet another practical example of the steps being taken to try and alleviate the administrative burden on insolvency practitioners.

It is perhaps not as well-known as it should be that the Bankruptcy (Scotland) Act 2016 sections 195 – 198 provides a six-week moratorium – effectively a postponement or period of protection from action to recover debts - to individuals, partnerships and trusts facing financial distress or liquidity issues.

The moratorium provides breathing space to allow parties to be protected from their creditors while they take advice and consider what debt relief options might be available to them.

A party can normally apply for the moratorium once in any 12-month period.

COVID-19 is an unexpected shock for many businesses. Some businesses are being significantly affected, particularly those in the travel and hospitality sectors. We consider some of the options open to otherwise good businesses facing cash-flow and other financial issues as a result of COVID-19.

How are governments dealing with COVID-19