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).
On Wednesday 29 April the Outer House of the Court of Session in Edinburgh issued an opinion sanctioning two schemes of arrangement proposed by Premier Oil Plc and Premier Oil UK Limited (together, Premier Oil) (the Schemes). The Court addressed multiple grounds of challenge and did so without hearing live evidence, despite disputes of fact between the parties.
On 28 March 2020, the Business Secretary, Alok Sharma, announced new insolvency measures to support companies under pressure as a result of the COVID-19 outbreak. In summary, the government is due to: (i) implement the landmark changes to the corporate insolvency regime that were announced in August 2018 (as discussed in Weil’s European Restructuring Watch update on 7 September 2018); and (ii) temporarily and retrospectively suspend wrongful trading provisions for three months.
Proposed Changes to the Corporate Insolvency Regime
The Australian Parliament has passed legislation granting temporary relief for businesses from statutory demands and liability for insolvent trading. Individuals will also be granted temporary relief in relation to bankruptcy notices.
Introduction
The Australian Parliament has passed a suite of temporary insolvency measures to combat the economic impacts of coronavirus. The changes, which are expected to come into effect shortly, will provide temporary relief from statutory demands and liability for insolvent trading.
Background
On 6 March 2020, the restructuring of Doncasters Group's 1.22 billion funded debt was completed. Following a successful non-core disposals program, the Doncasters Group (a leading worldwide supplier of high quality engineered components for the aerospace, industrial gas turbine and specialist automotive industries) operates from 12 principal manufacturing facilities based across the United Kingdom, the United States, Germany, Mexico and China.
syncreon Group Holdings B.V. (the “Company” and together with its subsidiaries, “syncreon”) completed its landmark financial restructuring today. As has been widely reported, syncreon’s reorganization is perhaps the first-ever use of an English scheme to restructure debt issued by a U.S.-based global enterprise. This also appears to be the first time that CCAA recognition of an English scheme has been granted.
The Restructuring
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
It is a defence to an unfair preference claim to show there were no reasonable grounds to suspect the insolvency of the debtor company.
Referred to as the ‘good faith defence’, the creditor has the onus of establishing the defence contained in section 588FG(2) of the Corporations Act 2001 (Cth).
Suspicion of insolvency
The courts have identified the following principles with respect to the good faith defence:
In the recent case of 1st Fleet Pty Ltd (in liquidation), the Court clarified the information disclosure obligations of external administrators in the Insolvency Practice Schedule (Corporations) (IPSC) and Insolvency Practice Rules (Corporations) 2016 (Rules).
There is only a short time period for compliance, and there can be cost consequences for non compliance.
In business it is not uncommon for a director of a company to be owed money by that company.
If the commercial relationship breaks down, the director may think it is an option to serve a creditor’s statutory demand on the debtor company.
However, recent court decisions demonstrate that issuing a creditor’s statutory demand is not a sure fire method of obtaining payment where the director is owed the debt personally or is a director of both the creditor and debtor companies.
Cases where statutory demands have been successfully challenged