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.
Summary
On 30 March 2022 the High Court sanctioned a restructuring plan for Smile Telecoms Holding Limited in which the court for the first time allowed the exclusion of all but one class of creditors from voting on a restructuring plan. The sanction hearing considered several salient issues around challenges made to a plan by a creditor or shareholder, questions of jurisdiction and the concept of a "compromise or arrangement" in Part 26A of the Companies Act 2006 ("CA 2006").
Background
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
The English High Court has rejected a challenge to the CVA proposed by Caffè Nero in a decision that provides guidance on the use of the electronic voting procedure for votes on CVAs, the effectiveness of modifications made to a CVA during the process and the duties of the directors and nominees when considering last minute offers for a business in a restructuring scenario. Mr Justice Green rejected all grounds of challenge brought by Mr Ronald Young, a landlord to Nero Holdings Limited ("NHL").
On 12 May 2021, in the first opposed cross-class cram down case, the English High Court sanctioned Virgin Active's restructuring plans, the first to bind landlords to lease compromises.
The decision
While the opposing landlords challenged the valuation evidence advanced by the companies, they did not advance evidence of their own. The court accepted the companies' evidence that:
On 17 May 2021, in the third of a trio of landlord challenge cases, the English High Court revoked Regis UK Limited's company voluntary arrangement (CVA) on one ground of unfair prejudice, but ruled against landlords seeking repayment of fees against the nominees.
The facts
On 10 May 2021, the English High Court rejected landlords’ challenge to the company voluntary arrangement (CVA) of fashion retailer, New Look. The New Look decision was the first in a trio of highly significant judgments focused on a distressed tenant's ability to compromise landlord's claims (our coverage of the Virgin Active and Regis decisions is available below).
The challenge
The landlords' challenge focused on jurisdiction, unfair prejudice and material irregularity as a result of the following:
Following review and proposal by the UK Government to develop stricter scrutiny of pre-pack administration sales to connected parties, the Government laid the draft Regulations in Parliament on 24 February 2021. These are due to come into force on 30 April 2021. Our previous article summarising the Government’s proposal can be found here.
IP licensing and insolvency reform: ipso facto clauses
Licensors of intellectual property rights may soon be unable to terminate licenses where the licensee has gone into an insolvency process.
What are ipso facto clauses and why do they matter?