It is not entirely clear how the UK Coronavirus Job Retention Scheme operates in line with current UK insolvency legislation, although it is clear that administrators can use the scheme and furlough employees.

What should you do if another business (i.e. a supplier, customer or other contract counterparty) is suffering distress and may be considering filing for insolvency?

This alert provides several “do’s” and “don’ts” to consider before and after insolvency and advises taking a proactive approach to dealing with distressed customers.

The SBA’s Rules Exclude Bankruptcy Debtors From Relief Under the Paycheck Protection Program

Our recent blog discussed the decision in Re Carluccio’s Limited (in administration) [2020] EWHC 88D (Ch) where the Court considered whether administrators would “adopt” the employment contracts of employees they furloughed after the 14 day grace period.

Authors:Hugh M.

The High Court has delivered the first decision on the Coronavirus Job Retention Scheme (the “Scheme”), in the context of the Carluccio’s administration.

As we have previously discussed (HERE), despite further clarification from HMRC over recent days, there remain some unanswered questions regarding the detailed operation of the Scheme, given that the Scheme’s exact legal framework has not been published.

On February 19, the Small Business Restructuring Act (SBRA) — the most significant change to the Bankruptcy Code in 15 years — went into effect. The SBRA, also known as Subchapter V of Chapter 11, removed numerous barriers that had long prevented small businesses from reorganizing in bankruptcy. On March 27, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) went a step further and significantly expanded eligibility under Subchapter V by raising the debt limit from $2.7 million to $7.5 million. This overview answers key questions about how these new laws work.

Over the weekend, the Business Secretary announced that UK Insolvency Laws will be changed.

The changes will give businesses “extra time to weather the storm” and give comfort to directors who, challenged with trading through a difficult cash flow period, will not face claims for wrongful trading.

Relaxation of wrongful trading provisions

The proposed measures alleviate concerns that borrowing additional funds offered by the Government could place a director at risk of personal liability.

The ILA Technical Committee, in conjunction with the CLLS, has produced the attached briefing note that reminds practitioners and businesses of the flexibility of a UK administration to stabilise, protect, and, if necessary, restructure companies.

An increasing number of businesses — even those that have traditionally been financially and operationally sound — are now experiencing unanticipated revenue losses as a result of the coronavirus pandemic. Companies may find themselves in the unfamiliar position of being out of compliance with financial covenants with lenders, unable to meet financial obligations to vendors, in default of contractual obligations, or in need of financial or restructuring/bankruptcy assistance.