As part of its pandemic-driven £1.2 billion solvent recapitalisation, Virgin Atlantic recently became the first company to use the UK government's new restructuring plan introduced in June 2020.
Let's look at why the court approved Virgin's restructuring plan, and what companies intending to use the new plan need to know before moving forward.
How was the CIGB received?
Were there any concerns?
What has changed?
What else was proposed?
What's next?
A recap
After the Corporate Insolvency and Governance Bill (CIGB) was published on 20 May 2020, it raced through the House of Commons and House of Lords and, on 26 June 2020 (in under 6 weeks) came into force as the Corporate Insolvency and Governance Act 2020 (CIGA), with certain of the temporary measures taking effect from 1 March 2020.
How was the CIGB received?
Permanent measures
Temporary measures
The much anticipated Corporate Insolvency and Governance Bill (the Bill) was published on 20 May 2020.
The much anticipated Corporate Insolvency and Governance Bill (the Bill) was published on 20 May 2020.
The proposed legislation is split into two broad categories: temporary provisions brought about as a result of COVID-19 and permanent provisions which will result in fundamental changes to UK insolvency law. The proposals, both temporary and permanent, reflect a shift towards a more debtor-friendly regime.
Building on measures already introduced in the Coronavirus Act – such as the moratorium on lease termination for non-payment of rent until 30 June 2020 – the Government announced that further emergency measures will be introduced.
Statutory demands and winding up petitions issued to commercial tenants to be temporarily voided
The forthcoming Corporate Insolvency and Governance Bill will include restrictions on the use of statutory demands and winding up petitions to recover sums owed by tenants.
Videology Inc and it's UK subsidiary, Videology Limited (the "Company") applied to the English court for their US Chapter 11 proceedings to be recognised as "foreign main proceedings" under Article 17 of the UNCITRAL Model Law of Cross-Border Insolvency (the "Model Law") and for an administration moratorium under the Article 21 of the Model Law. The Videology group had secured an agreement with an interested party to buy its business and assets.
Decision
Introduction
New restructuring procedure
New moratorium procedure and protections regarding supplies of goods and services/licences
Greater accountability
The UK government announced on 26 August 2018 that it will legislate to update the restructuring and insolvency systems, with the aim of the UK retaining the gold standard regime. The reforms are a response to international developments (with countries such as Spain and the Netherlands recently introducing updated insolvency systems) and some domestic corporate collapses which have put the UK system under stress.
The reforms are wide-ranging. Headline changes will include: