Introduction
Background to the case
The Company's case for appointing an examiner
The controversy
The decision
The implication for use of CVAs in England
In the third (and final) of our blog series on recent CVA cases, in Rhino Enterprises Properties Ltd & Anor [2020] EWHC 2370 (Ch), the High Court gave permission for misfeasance proceedings to be brought against two former joint administrators. This was despite an approved Company Voluntary Arrangement (“CVA”) containing a clause releasing the joint administrators from liability.
Increasing pressures placed on those operating in the retail and hospitality sectors as a result of COVID-19, means there is likely to be an increasing use of CVAs in these sectors. The intention would be to help support and restructure businesses in distress, but could retailers use a CVA as a mechanism to re-write the terms of its leases?
The COVID-19 pandemic has exacerbated the problems faced by high-street retailers. Store closures during lockdown, changing consumer behaviour and the resultant loss of turnover and profits have caused many businesses to seek to reduce their rent payments. Company Voluntary Arrangements (“CVAs”) have become fashionable tools for trying to secure such rent reductions.
Significant changes will come into force after 31 December if no agreement is reached (or is not finalised and ratified) before the end of the transition period for cross-border insolvency proceedings. Importantly, the changes will alter the grounds for jurisdiction to open insolvency proceedings in the UK and impact the recognition of those UK insolvency proceedings in the EU.
On 26 November 2020, The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Suspension of Liability for Wrongful Trading and Extension of the Relevant Period) Regulations 2020 (the “Regulations”) came into force.
The re-introduction of Crown preference and the resulting change in the order of priority of creditors on insolvency was announced as part of the Autumn budget in 2018, way before anyone had heard of coronavirus or COVID-19, and was originally due to come into force on 6 April 2020. It was delayed until 1 December 2020 in terms of the 2020 budget which was presented to Parliament on 11 March 2020, the same day as the World Health Organization declared the outbreak of COVID-19 a pandemic.
What is a pre-pack?
Pre-pack is the term used to describe an arrangement whereby the sale of all or part of a company’s business and/or assets is negotiated and agreed before an insolvency practitioner (IP) is appointed, with the relevant documentation being signed and implemented, immediately or shortly, after the appointment is made.
Contents of winding-up petition
Private petitions
Pre-trial review
Preliminary hearing
Multiple winding-up petitions
The Corporate Insolvency and Governance Act 2020 (the “Act”) came into force on 26th June 2020. Alongside the Act, a new Insolvency Practice Direction (“IPD”) came into force and provides additional information in respect of winding petitions and the “coronavirus test”. This blog will look at a few of the key changes contained in the IPD.