Prompted by the EU Restructuring Directive and accelerated by the pandemic, jurisdictions all across Europe have completely transformed their restructuring regimes in recent years. This is part of a global trend towards more debtor-friendly, rescue-orientated restructuring regimes, inspired by US Chapter 11.
On 25 January 2022, the Financial Conduct Authority (FCA) published draft guidance on how it will approach ‘compromises’ by regulated firms. The guidance is expressed to cover restructuring plans, schemes of arrangement and CVAs.
A new Act, which received Royal Assent on 15 December 2021, extends the existing directors’ disqualification regime to the directors of dissolved companies.
On 28 June 2021, the UK High Court declined to sanction Hurricane Energy Plc’s restructuring plan. This was the first time a restructuring plan seeking to achieve a debt-for-equity swap against the wishes of existing shareholders had come before the court.
Background
A new bill, which the UK Government introduced to Parliament on 12 May 2021, seeks to extend the existing directors’ disqualification regime to the directors of dissolved companies.
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.
The Australian Federal Court has made orders relieving the administrators of retailer Colette from personal liability for rent in response to the COVID-19 crisis and the current uncertainty in respect of government policy about rent relief for tenants: see
What you need to know
Amendments to the Corporations Act 2001 (Cth) (Corporations Act) to implement the measures announced by Treasurer Josh Frydenberg on Sunday, 22 March 2020 to provide temporary relief for financially distressed businesses due to COVID-19 have now come into effect.
The Coronavirus Economic Response Package Omnibus Act 2020 (Cth) (CERPO Act) amendments were passed by the Parliament on 2 March 2020. They will apply for a 6 month period, but may be extended or have impacts beyond that timeframe.