The new Pre-Pack Regulations have been approved by the UK Parliament and are due to come into effect on 30 April 2021 for administrations commencing from then.
On 24 March 2021, further extensions were announced to the range of government measures aimed at protecting UK companies and directors affected by COVID-19.
Measures extended to 30 June 2021
From 1 December 2020 onwards, HMRC will be treated as a preferential creditor of companies for certain taxes including PAYE, VAT, employee NICs and Construction Industry Scheme deductions. In the event that a company enters administration or liquidation, HMRC's claim for these taxes will rank ahead of any floating charge holder.
This reflects recent changes made to the Finance Act 2020.
The impact on floating charge holders
On 13 January 2021, the English High Court sanctioned three interconditional Part 26A restructuring plans for the subsidiaries of DeepOcean Group Holding BV.
The plans for two of the companies were approved by the required 75% majority. While the third plan received 100% approval by secured creditors, only 64.6% of unsecured creditors voted in favour.
Consequently, at the sanction hearing the court was required to consider whether the cross-class cram down mechanism in the restructuring plan should be engaged for the first time in the UK.
On 11 February 2021, the English High Court confirmed in gategroup Guarantee Limited that restructuring plans are insolvency proceedings so are not covered by the Lugano Convention.
One of the debt instruments subject to the gategroup restructuring plan contains an exclusive Swiss court jurisdiction clause. Under the Lugano Convention, proceedings relating to "civil and commercial matters" must generally be brought in the jurisdiction benefitting from the exclusive jurisdiction clause.
In Uralkali v Rowley and another [2020] EWHC 3442 (Ch) – a UK High Court case relating to the administration of a Formula 1 racing team – an unsuccessful bidder for the company's business and assets sued the administrators, arguing that the bid process had been negligently misrepresented and conducted.
The court found that the administrators did not owe a duty of care to the disappointed bidder. It rejected the claimant's criticisms of the company’s sale process and determined that the administrators had conducted it "fairly and properly" and were not, in fact, negligent.
In Uralkali v Rowley and another [2020] EWHC 3442 (Ch) – a UK High Court case relating to the administration of a Formula 1 racing team – an unsuccessful bidder for the company's business and assets sued the administrators, arguing that the bid process had been negligently misrepresented and conducted.
The court found that the administrators did not owe a duty of care to the disappointed bidder. It rejected the claimant's criticisms of the company’s sale process and determined that the administrators had conducted it "fairly and properly" and were not, in fact, negligent.
Insurers with portfolio assets that are distressed because of the COVID-19 pandemic will want to consider the extension of prior guidance from the National Association of Insurance Commissioners (NAIC) on restructuring such debt.
Our two-part article on non-con and true sale issues in insurance contexts continues with a deeper dive into the considerations that distinguish these issues from similar remoteness principles in a Bankruptcy Code context. In Part One, we explained some of the basics of state insurance law that bear on these issues and how these can give rise to different approaches in opinion-giving; in this Part Two, we identify some practical obstacles that arise in these kinds of contexts and opinions.
A Pennsylvania Hypothetical
This two-part article discusses the key concerns, from a non-consolidation and true sale perspective, that arise when an insurance company, as opposed to a bankruptcy-eligible entity, is a sponsor/seller in a securitization or similar structured finance transaction. This Part One introduces the main contrasts between non-con and true sale analysis in a traditional bankruptcy context and such analysis in an insurance-law scenario.