Today, the Government published the highly anticipated Corporate Insolvency and Governance Bill (the “CIGB”).  It legislates for the landmark changes to the UK’s corporate insolvency regime and the temporary suspension of the statutory provisions on wrongful trading announced by the Business Secretary on 28 March 2020 (see Weil’s European Restructuring Watch update of 30 March 2020).

The German Federal Government’s various aid measures for employees, self-employed persons, small, medium and large enterprises are suitable for alleviating personal hardships, reducing the economic costs of insolvencies and plant closures and supporting the economy. In addition, it is important that the German Federal Government will play also a constructive role in overcoming the crisis on a European level, to avoid the COVID19 pandemic leading to a European sovereign debt crisis.

On March 23, 2020, the German Federal Government (Bundesregierung) published a draft bill to mitigate the consequences of the COVID-19 in civil, insolvency and criminal procedural law.

The German Federal Ministry of Justice and Consumer Protection is preparing new legislation suspending the obligation to file for insolvency in order to protect companies that encounter financial difficulties due to the coronavirus crisis (see here).

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?

On 11 July the government published draft legislation for the Finance Bill 2020.  We set out below details of the key insolvency measures in the proposed legislation. The draft legislation is open for technical consultation until 5 September 2019, but the principles of the legislation are not expected to change.

Overview

The reintroduction of Crown Preference

Over the last two years, BEIS has issued a number of consultations either focussed on, or touching upon, corporate governance issues in insolvency or the broader insolvency framework.

On 12 March 2018 the European Commission published a proposal for a Regulation to govern the law applicable to the third-party effects of assignments of claims (the “Assignment Regulation”).

The proposal of the Assignment Regulation adopted by the European Commission deals with which law applies to determine the effectiveness and perfection of the transfer of title – and the creation of other rights like pledges and charges – in relation to claims and receivables vis-a-vis third parties.

2018 has been described as “the year of the CVA”, especially in the retail and casual dining sectors. Although company voluntary arrangements can be a useful tool to compromise portfolios of leasehold obligations, there are certain situations where a CVA may be unsuitable.

1. When a full operational and/or financial restructuring is required

In the context of German restructuring, bridge loans (Überbrückungskredite) are loans that are granted to financially distressed companies until a restructuring plan is formulated in order to avoid the company’s insolvency. In most cases, such loans are granted for a limited timeframe. After the restructuring plan has been finalized, renegotiations are usually required, in particular between the company, the lender and the company’s other creditors.