As we see more businesses having to close doors or adapt to a new set of rules, we set out a summary of some of the issues we anticipate for those needing to shut down but preserve their businesses at least until the lockdown is over. We will produce a more detailed client alert as matters develop although one message is clear – employers, employees, suppliers and customers are facing unique challenges and the best way to survive is to identify the issue, understand the options, and engage with pragmatism.

Employees

In this article, we focus on working capital and consider ways a business can seek to weather the storm and preserve all-important liquidity through this challenging period.

Practical Tips

Given the unprecedented challenges presented by COVID-19 globally, what can senior management do in order to manage and mitigate the risk to the company's financial health?

The Pension Schemes Bill 2019 is causing a marked degree of consternation in the restructuring community. The proposed legislation introduces new offences that can be prosecuted in the criminal courts and further moral hazard powers that are likely to significantly reduce the directors’ and insolvency practitioners’ ability to provide commercial and creative solutions to creditors of financially stressed companies.

At clause 107, the Bill introduces two new criminal offences and below we address the concerns these cause:

With the introduction of electronic filing which allows parties to file documents at court 24/7 we consider the recent case of Wright v HMV Ecommerce Limited (2019) in which the court was asked to confirm whether administrators were validly appointed following the directors filing a notice of appointment after the court office was closed.

The Electronic Working Pilot Scheme (“EWP“) Practice Direction came into effect in 2015, initially in the London region. It now applies in all Business and Property Courts in England and Wales from 30 April 2019.

In the last week we have seen MPs criticise accountancy firms, KPMG, Deloitte, EY and PWC in their first report on the collapse of Carillion, describing the big four as “a cosy club” and calling for the firms to be forcibly broken up. Whilst not suggesting that the firms were to blame for the collapse, it is the level of fees reportedly paid to the firms which caught the MPs attention– £72 million in 10 years.

For decades, restructuring and insolvency matters in the Dominican Republic involving merchants and companies in non-regulated industries have been carried out on a “de facto” basis, due to the obsolescence of the existing legal framework and institutions. Fortunately, that is not the case anymore.

Air Berlin, one of Europe’s largest airlines, filed for insolvency on 15 August 2017. The airline, which is Germany’s second-largest carrier after Lufthansa, filed following the decision by Etihad Airways to pull financial support. Etihad owns 29% of Air Berlin and had been pumping money into the struggling airline for the past 6 years.

On July 6-7, 2017, Craig Jalbert, in his capacity as Trustee for F2 Liquidating Trust, filed approximately 187 complaints seeking the avoidance and recovery of allegedly preferential and/or fraudulent transfers under Sections 547, 548 and 550 of the Bankruptcy Code (depending on the nature of the claims). In certain instances, the Trustee also seeks to disallow claims of such defendants under Sections 502(d) and (j) of the Bankruptcy Code.

On June 15, 2017, Curtis R. Smith, as Liquidating Trustee of the Hastings Creditors’ Liquidating Trust, filed approximately 69 complaints seeking the avoidance and recovery of allegedly preferential and/or fraudulent transfers under Sections 547, 548 and 550 of the Bankruptcy Code. The Liquidating Trustee also seeks to disallow claims of such defendants under Sections 502(d) and (j) of the Bankruptcy Code.

On June 13, 2017, The Original Soupman, Inc. and its affiliates (collectively “Debtors” or “Original Soupman”) commenced voluntary bankruptcy proceedings under Chapter 11 of the Bankruptcy Code. According to its petition, Original Soupman estimates that its assets are between $1 million and $10 million, and its liabilities are between $10 million and $50 million.