Introduction

On Saturday (28 March 2020) the UK Government announced certain changes to insolvency laws in response to COVID-19, intended to help companies and directors.

There are two aspects to the changes:

The Australian Federal Government has now passed temporary amendments to insolvency and corporations laws in light of the challenges COVID-19 poses to many otherwise profitable and viable businesses.

The Australian Federal Government has announced today (22 March 2020) that it intends to make temporary amendments to insolvency and corporations laws in light of the challenges COVID-19 poses to many otherwise profitable and viable businesses.

In particular, the government intends to relieve directors from the risk of personal liability for insolvent trading, where the debts are incurred in the ordinary course of business.

The Australian Federal Government has announced today (22 March 2020) that it intends to make temporary amendments to insolvency and corporations laws in light of the challenges COVID-19 poses to many otherwise profitable and viable businesses.

In particular, the government intends to relieve directors from the risk of personal liability for insolvent trading, where the debts are incurred in the ordinary course of business.

Introduction

The decision of ICC Judge Barber in the case of Stephen Hunt & System Building Services Group Limited -v- Brian Michie & System Building Services Group Limited [2020] EWHC 54 (Ch) was recently handed down and it is an interesting decision about directors’ duties post the appointment of an administrator or liquidator.

Facts

The facts are quite involved and matter specific, and gave rise to a number of issues, but for present purposes the key issues are as follows.

Pension Schemes Bill – Additional hurdle for English law restructurings?

The intention was that the Pension Schemes Bill would enhance the Pensions Regulator’s powers to respond earlier when employers fail to take their pension responsibilities seriously, targeting “reckless bosses who plunder people’s pension pots”. However, the new criminal offences proposed as part of the Bill may inadvertently create additional hurdles for English law restructurings, making them potentially more expensive and difficult.

Background

The aim of the compensation order regime, to make directors financially account for the consequences of their unfit conduct, applies to directors’ conduct after 1 October 2015 and gives the Secretary of State (“SoS”) the power to apply for a compensation order against a director who is either subject to a disqualification order or who has given a disqualification undertaking and the conduct of that person has caused loss to one or more creditors of the insolvent company.

Following an expedited trial, the High Court has rejected an application brought by a group of landlords known as the Combined Property Control Group (“CPC”) to challenge the company voluntary arrangement (“CVA”) proposed by Debenhams Retail Limited (“Debenhams”).

CPC challenged the CVA on five grounds. The judge in the case, Mr Justice Norris, held that four of the five grounds failed and directed certain “Forfeiture Restraint Provisions” be removed from the CVA as a result of the fifth.

On 22 August 2019, the Federal Court of Australia (FCA) held that it could make a request to the New Zealand High Court (NZHC) that there be a joint hearing of those courts in respect of applications relating to the pooling of various funds held by companies subject to Australian and New Zealand liquidations, respectively.

Such a ‘letter of request’ could be issued by the FCA to a foreign court in the context of an Australian insolvency process pursuant to section 581 of the Corporations Act 2001 (Cth) (Corporations Act).

In Swiss Cosmeceutics (Asia) Ltd [2019] HKCFI 336, Mr Justice Harris of the Hong Kong Court of First Instance declined to wind up a company despite it failing to establish a bona fide defence on substantial grounds. Mr Justice Harris commented on the difficulties presented by sporadic record keeping, and reiterated the principle that the burden of proof lies with the company to demonstrate a bona fide defence on substantial grounds, despite the existence of anomalies in the petitioner’s claim.

Facts