For many companies facing financial stress, restructuring liabilities is the only way for their business to survive. Consensual restructuring, or voluntary workout, requires agreement from creditors to reorganise the company’s liabilities, and is typically implemented by agreement between the company and its creditors. Court-based restructuring processes, on the other hand, involve at least some degree of legal coercion of creditors to vary or release liabilities.
Notwithstanding the phased return to some level of normality, some businesses will continue to be significantly affected, particularly those in the leisure, travel/tourism, retail and hospitality sectors. These sectors will face longer term challenges due to social distancing requirements, consumer unease and the likely absence of international travel for many months, or perhaps even longer. However, these are not the only sectors that will suffer.
The Office of the Director of Corporate Enforcement (ODCE) has provided guidance on its approach to directors of companies, made insolvent by the COVID-19 pandemic, who act in good faith on objective evidence in trying to rebuild their businesses.
The issue
The consequences of the COVID-19 crisis have made many businesses that were solvent, and will likely become solvent again, technically insolvent.
Notwithstanding the phased return to some level of normality, some businesses will continue to be significantly affected, particularly those in the hospitality sector where longer term challenges may be encountered due to social distancing requirements, consumer unease and the likely absence of international travel for many months, or perhaps even longer.
The Court of Appeal has provided much needed clarification of the test for validating certain transactions by companies that are subject to a winding-up petition, pursuant to Section 99 of the Companies Law (2020 Revision).
The Cayman Islands Court of Appeal has provided much needed clarification of the test for validating certain transactions by companies that are subject to a winding up petition, pursuant to section 99 of the Companies Law (2020 Revision) (the "Companies Law").
The Legal Issue of Principle
COVID-19 is an unexpected shock for many businesses. Some businesses are being significantly affected, particularly those in the travel and hospitality sectors. We consider some of the options open to otherwise good businesses facing cash-flow and other financial issues as a result of COVID-19.
How are governments dealing with COVID-19
We consider one case illustrating the efficiency of international insolvency proceedings commenced in Ireland, improvements to the efficiency of the appellate courts and one imminent legislative change, which will impose an administrative burden on the holders of security over book debts.
Ireland as an efficient venue for international insolvency
“To achieve great things, two things are needed: a plan, and not quite enough time.” – Leonard Bernstein
To paraphrase, great things happen when there is a plan and a deadline.
Examinership is one of Ireland’s key rescue processes for insolvent companies. It has been used successfully in very many cases since its introduction almost 20 years ago.
Crucially, it encompasses a deadline with no flexibility.
100 days