For most businesses, the Chancellor’s budget statement yesterday brings some welcome news with the extension of certain critical Covid-19 support measures. However, this is coupled with the removal of certain government-backed loan schemes and a future increase in the corporation tax rate from 19 per cent to 25 per cent from 2023 onwards.
Over the last 12 months, global markets have been amazingly resilient, indeed even buoyant, aided in large part by governments around Europe and the world providing seemingly unlimited funding and extensive financial stabilisation measures, such as quantitative easing.
This, coupled with protective legislation for companies to prevent insolvency filings and to ensure continued trading – for example, moratoriums, relaxations on insolvency filing obligations and restrictions on creditor actions – has given businesses significant breathing space and prevented widespread failures.
After Virgin Atlantic and Pizza Express achieved ‘too much consent’ and did not need cross-class cram down in the end, DeepOcean is the first judgment applying cross-class cram down as part of a restructuring plan.
The High Court has, for the first time, sanctioned a restructuring plan exercising the power to cross-class cram down. The court handed down its sanction order but noted that, as the first decision to use cross-class cram down, a reasoned judgment will follow in due course.
On 13 January 2021, the court sanctioned three interconditional restructuring plans ('the restructuring plans') for three subsidiaries of DeepOcean Group Holding BV (together with all of its subsidiaries, 'the DeepOcean Group'):
As widely blogged about, on 26 June 2020 the Corporate Insolvency and Governance Act 2020 (the Act) came into force, introducing both far-reaching wholescale reforms to the UK’s restructuring toolbox as well as temporary measures dealing with COVID-19 impacts on companies. The two most significant temporary measures for companies facing financial difficulties as a result of the COVID 19 pandemic were:
On 8 October 2020, the UK Government published draft regulations applying to sales in administration by way of a 'pre-pack' to a connected party purchaser.
UK pre-pack administrations
A pre-pack administration is where:
In March 2020, the UK government announced that changes will be made to enable UK companies undergoing a rescue or restructure process to continue trading, giving them breathing space that could help them avoid insolvency.
The legislation implementing this has now been laid before Parliament in the Corporate Insolvency and Governance Bill. This includes measures intended to tide companies through the COVID-19 pandemic, as well as far-reaching wholesale reforms to the UK’s restructuring toolbox.
Introduction
The concept of winding up does not exclusively apply to insolvent companies. Solvent companies can also be wound up, on the initiation of the company’s directors and shareholders (for example, as part of a corporate reconstruction or to close down non-operating or redundant entities).
An overview of the two key procedures to effect the dissolution of a solvent Australian company, being Members’ Voluntary Liquidation and Deregistration, is set out below.
In brief
Even with the fiscal stimulus and other measures taken by the Federal and State governments in Australia, corporate insolvencies are likely to increase in coming months.
Under Australia's insolvency regimes, a distressed company may be subject to voluntary administration, creditor's voluntary winding up or court ordered winding up (collectively, an external administration). Each of these processes raises different issues for the commencement and continuation of court and arbitration proceedings.
In summary
In our previous alert we discussed how Justice Markovic in the Federal Court of Australia had granted the administrators of retailer Colette Group relief from personal liability for rent in respect of 93 stores.