On 27 February 2024, the High Court sanctioned a restructuring plan (the Plan) proposed by CB&I UK Limited (CB&I), part of the global McDermott construction and engineering group (the Group). This is the first English restructuring plan to be approved after the Court of Appeal judgment in Adler (see our Alert) and follows the guidance in that case.
Background
On 23 January 2024, the Court of Appeal overturned the High Court's sanction of Adler Group's (Adler) restructuring plan (the Plan) (see our alert). This much anticipated judgment provides clarity on the court's discretion to sanction a plan where there are dissenting classes of creditors.
Background
The Plan envisaged:
The Court of Appeal has recently referred to established case law that the court will only interfere with the act of an officeholder “if he has done something so utterly unreasonable and absurd that no reasonable man would have done it”.
While the judge in the lower court had not made any error of law, on the facts there were identifiable flaws in the judge's reasoning that the trustees' decision not to join in the proceedings was perverse.
The judge had failed to recognise that:
After a weekend that saw the tech ecosystem unite to fight for its future, on Monday 13 March 2023, the Bank of England (the Bank) effected the sale of Silicon Valley Bank UK Ltd (SVB UK) to HSBC. It used the resolution powers for stabilising failing banks granted by the Banking Act 2009 which were introduced following the 2008/9 financial crisis.
Resolution powers
The UK insolvency statistics released on 2 August for Q2 2022 (1 April – 30 June 2022) make for fairly sombre, if not entirely unsurprising, reading.
An 81% increase in corporate insolvencies in England and Wales from the same period in 2021 and a 13% increase in insolvencies from Q1 2022. The worst affected sectors are reported to include food, retail and construction.
The UK High Court has excluded 'out of the money' creditors and shareholders from voting on Smile Telecoms Holdings Limited’s (Smile) restructuring plan because they did not have a genuine economic interest in the company.
Background
- Commercial rent arrears continue to accumulate as a result of the pandemic, such that arrears are estimated to reach £9 billion by March 2022 and comprise a much larger slice of the typical debt stack than they did pre-pandemic.
- The UK government has proposed a binding arbitration scheme to help resolve the arrears and further extend the existing protections from enforcement and insolvency procedures that
- Brexit ripped up the rules on automatic cross-border recognition of formal insolvency proceedings and restructuring tools between the UK and the EU.
- Recognition will now depend on a patchwork of domestic legislation, private international law and treaties and may lead to different outcomes depending on the jurisdiction.
- Cross-border recognition is still achievable but involves careful navigation and a more tailored approach in individual cases to selection of the most effective process and its route to recognition.
Legal landscape
The consequent distress in the market is evident with 9 supplier insolvencies in the last few weeks alone, including Avro Energy, Utility Point and People’s Energy.
Today, 1 October 2021, is important as Ofgem is due to increase tariff caps from that date. This is also the date when the restrictions on petitioning for the winding up of companies on the basis of insolvency will be eased.
Legal landscape – energy regulations
In distressed situations, there are a number of issues to navigate, including:
There have been two recent changes to the insolvency laws in England and Wales relating to winding up petitions1 and Part 1A moratoriums.
Winding up petitions – Relaxation of restrictions