During the course of the pandemic we have seen an unprecedented level of government assistance aiming to aid businesses struggling with the effects of the pandemic. This has resulted in consistently low insolvency levels. This year we will see the lifting of certain of the restrictions and the end to some of the support initiatives that have been in place. We have outlined some of the key changes and what might be in store for 2022.
Hong Kong courts recently recognised reorganisation proceedings in Mainland China for the first time in Re HNA Group Co Limited [2021] HKCFI 2897, further enhancing the cooperation between Mainland China and Hong Kong in cross-border insolvency matters.
The facts
In May 2021, a landmark co-operation mechanism was implemented between Hong Kong and Mainland China in cross-border insolvency matters.
Liquidators from Hong Kong can now apply to the courts in three Mainland "pilot cities" (ie Shanghai, Shenzhen and Xiamen) for recognition and assistance, provided that:
The Hong Kong government will introduce a long-awaited statutory corporate rescue procedure (CRP) in 2021, bringing the regime more in line with international practice in jurisdictions such as the UK and the USA.
The current lack of a CRP in Hong Kong means that there are limited options available to distressed companies and the lack of a moratorium on creditor enforcement jeopardises legitimate restructuring efforts. The Companies (Corporate Rescue) Bill is timely given the difficulties brought by the current economic downturn, itself exacerbated by the impact of COVID-19.
The UK Government has published a Consultation1 which sets out its proposals for targeted (but significant) amendments to certain aspects of the existing UK insolvency arrangements for insurers.
The Hong Kong government will introduce a long-awaited statutory corporate rescue procedure (CRP) in 2021, bringing the regime more in line with international practice in jurisdictions such as the UK and the USA.
The current lack of a CRP in Hong Kong means that there are limited options available to distressed companies and the lack of a moratorium on creditor enforcement jeopardises legitimate restructuring efforts. The Companies (Corporate Rescue) Bill is timely given the difficulties brought by the current economic downturn, itself exacerbated by the impact of COVID-19.
The English High Court has sanctioned the restructuring plans proposed by the Virgin Active group following a hearing contested by a group of the gym chain's landlords. The decision represents the first use of the restructuring plan procedure, introduced during the summer of 2020, to restructure a lease portfolio, demonstrating the utility of the tool for debtors when implementing a significant restructuring across the capital structure, and as an alternative to the much-used company voluntary arrangement.
Introduction
Introduction – the framework
The Corporate Insolvency and Governance Act 2020 (“CIGA“) ushered in a flexible restructuring compromise or arrangement for companies in financial difficulty (the “Restructuring Plan“). The legislation governing the Restructuring Plan sits alongside that for schemes of arrangement and is included in a new Part 26A to the Companies Act 2006.
The Restructuring Plan does not apply to companies that are solvent with no risk of insolvency; rather it only applies to companies where two conditions have been satisfied: