The UK's accession to the Lugano Convention has become somewhat politicised, with the EU stating that it is not minded to allow the UK to accede, as that will then set a precedent for other third party states.

This will impact certain UK restructuring tools.

Corporate Insolvency and Governance Act 2020 regulations come into force on 26 March 2021 extending the duration of COVID-19 related temporary measures, including:

Some interesting recent scheme and plan law of late, proving that schemes and plans continue to be popular restructuring tools for all types of companies and international groups.

DeepOcean companies (Part 26A plans) – January 2021

This was the first time that the court had to consider the application of the new ‘cross-class cram down’ procedure under Part 26A. Trower J approved the plans proposed by three DeepOcean companies but had reserved judgment and in late January handed down a written judgment with important guidance for future plans.

Another interesting case on schemes around the issue of insolvency. A judgment handed down yesterday by Snowden J in MAB Leasing Limited (a Malaysia Airlines leasing company) "parked" the issue of whether a Part 26 scheme (note, not a Part 26A plan) was an insolvency related event under the Cape Town Convention and Aircraft Protocol, as there was unanimous creditor consent. At the earlier convening hearing, Zacaroli J, without needing to decide the issue, stated that the company counsel's skeleton provided a "powerful case for concluding that the [Cape Town Convention] did not apply".

Very interesting judgment yesterday from Zacaroli J in "gategroup Guarantee Limited" (with a small g) that Part 26A plans are insolvency proceedings and therefore fall outside European civil and commercial jurisdictional rules. Pre-Brexit case law tells us that Part 26 schemes are probably not insolvency proceedings and are therefore capable of falling within those rules. Zacaroli J found that the "financial difficulties" threshold conditions to Part 26A plans (which do not exist for Part 26 schemes) made a significant difference.

The new UK legislation for companies in financial difficulty represents a fundamental shift in approach to restructuring in Europe and adds an important new tool to the UK restructuring framework. The availability of a plan proposed under the new Part 26A of the Companies Act 2006 (a “Restructuring Plan”) will undoubtedly change how many distressed companies seek to address their financial difficulties. However, until case law is developed, there will remain considerable uncertainty as to how the Restructuring Plan will work in practice.

In an application by Joint Official Liquidators for sanction of an agreement to sell the assets of a Company over the objections of creditors, the Court has confirmed the importance of establishing a clear and transparent sale process, which enjoys the confidence of the interested parties, in order to establish that the sale agreement is in the best interests of creditors.

Background

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 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.