Changes are afoot to the statutory regime governing special administrations for regulated water companies (the SAR) following the publication of a suite of new legislation.

Impact of the changes on pension trustees

On 23 January 2024, the Court of Appeal handed down its much anticipated judgment[1] on the appeal of the Adler restructuring plan pursuant to Part 26A of the Companies Act 2006 (“RP”), which was sanctioned by the High Court on 12 April 2023

The Bankruptcy Code does not explicitly authorize the equitable remedy of "substantive consolidation"—i.e., treating the assets and liabilities of two or more related entities as if they belonged to a single, consolidated bankruptcy estate. However, it is well recognized that a bankruptcy court has the authority to order such relief under appropriate circumstances in the exercise of its broad equitable powers when each of the original entities are already debtors subject to the court's jurisdiction.

Monitoring Winding up Petitions

While not an everyday occurrence, a company being issued with a winding up petition is an eventuality that all providers of finance, whether on a secured or unsecured basis, will prepare for.

From a contractual perspective, facility agreements will include specific monitoring information covenants as part of the core relationship housekeeping, supported by a hard backstop of event of default triggers, with rights for debt acceleration, and (if applicable) security enforcement operating in tandem from that point.

Beware of Demand Letters

An immediate concern for any company is a threat to present a winding up petition made in an email or letter – regardless of the size of debt, whether the debt is disputed or the company has a counterclaim.

The consequences of ignoring such a threat can have an immediate and adverse impact on a business. Failure to respond can be used as evidence that the company is unable to pay and that can be used as evidence to support presentation of a winding up petition.

A floating charge debenture holder has the advantage that they can enforce their security by appointing their choice of administrators. This is a powerful and useful tool for lenders but is subject to the caveat that the debenture has to be “qualifying”.

Snapshot

The Restructuring Plan (Plan) was introduced as part of the UK Corporate Insolvency and Governance Act 2020, which introduced a new part 26A into the Companies Act 2006 (CA 2006). The part 26A Plan provisions are largely based on the existing scheme of arrangement rules detailed under part 26 of the CA 2006, and it is often referred to as the “super scheme”.

Plans now sit alongside schemes of arrangement and company voluntary arrangements (CVAs) to provide a further restructuring option for companies and insolvency practitioners alike.

To shield bankruptcy trustees and certain other entities from litigation arising from actions taken in their official capacity, the "Barton doctrine"—now more than a century old—provides that such litigation may be commenced only with the authority of the appointing court. The doctrine has certain exceptions, one of which—the "ultra vires exception"—was recently examined by the U.S. Court of Appeals for the Fifth Circuit as an apparent matter of first impression.

‘If, at first, you don’t succeed, then try and try again’ is a fitting description for HMRC’s recent approach to restructuring plans, with its opposition of plans proposed by The Great Annual Savings Company (GAS) and Nasmyth Group Limited (Naysmyth).

The GAS sanction hearing (which is due to take place this week) will be the first time that HMRC has taken an active role contesting a restructuring plan at sanction following the case of Houst where the Court exercised its discretionary power to “cram down” HMRC.

With all the market turmoil and headlines about insolvencies or potential insolvencies in the financial sector and the wider markets, and potential rescue of stressed/distressed entities, many clients are concerned, and should be thinking, about the potential impact of these developments on their derivatives (commonly documented under an ISDA master agreement (an ISDA)) and, in particular: (a) if the relevant event constitutes a default, potential event of default, event of default or termination event or, alternatively, will trigger automatic early termination, under their ISDAs with their