Suppliers can no longer terminate contracts, refuse to supply goods or services or amend payment terms with an insolvent customer due to its insolvency, save in limited circumstances. The new rules - brought in by the Corporate Insolvency and Governance Act 2020 (“CIGA”) - governing protection of supplies significantly restrict parties’ autonomy in relation to customer insolvency and will be a cause of concern for many suppliers.

New protection of supplies to insolvent companies

Secured lenders are troubled at the recent news that a New York state court judge denied a preliminary injunction request filed in the Supreme Court of New York by a group of dissenting first-lien lenders, seeking to prevent a borrower, Serta Simmons, and certain first-lien consenting lenders from entering into a recapitalization transaction. In exchange for the purchase of the consenting lenders’ debt at a discount, the consenting lenders received new super-priority debt ranking ahead of the non-consenting lenders’ debt.

As discussed in earlier posts,¹ substantial uncertainty exists over whether companies in bankruptcy are eligible to pursue funding pursuant to the SBA’s Paycheck Protection Program, or PPP, which was established by the CARES Act to support small businesses by offering SBA-guaranteed loans on advantageous terms.

In his judgment handed down on 7 May 2020 in the case of Gregory v ARG (Mansfield) Ltd [2020] EWHC 1133 (Ch), HH Judge Davis-White QC, sitting as a Judge of the High Court, commented (on an obiter basis) that where a company regulated by the Financial Conduct Authority (the “FCA”) seeks to enter administration, section 362A of the Financial Services and Markets Act 2000 (“FSMA 2000”) and paragraph 29 of Schedule B1 of the Insolvency Act 1986 (the “Insolvency Act”), require that writ

On 20 May 2020, the Corporate Insolvency & Governance Bill 2019-2021 was introduced to Parliament. With the Bill slated to be fast-tracked into law, here are some of the key insolvency aspects to be aware of.

Why now?

As discussed in an earlier Legal Update,¹ substantial uncertainty exists over whether companies in bankruptcy are eligible for loans under the Paycheck Protection Program, or PPP, which was established by the CARES Act to support small businesses by offering SBA-guaranteed loans on advantageous terms. Several recent bankruptcy court decisions underscore this uncertainty.

The extraordinary disruption to UK business caused by the COVID-19 lockdown has spawned much discussion about changes to existing insolvency laws to help businesses which are struggling to survive in this abnormal environment. One topic of discussion has been the so-called ‘light touch’ administration. Here we provide a quick overview of what this involves.

What do we mean by a ‘light touch’ administration?

It is now common knowledge that the Government has responded to the COVID-19 crisis with a number of protective measures, including the Coronavirus Job Retention Scheme (CJRS), which provides support to businesses that cannot maintain their current workforce because their operations have been severely affected by COVID-19. Under the CJRS, employers can apply for a grant to cover 80% of the wages (up to £2,500 per month) of employees who are placed on furlough leave.

As courts across the country deal with scaled back operations due to the COVID-19 pandemic, bankruptcy courts in New Jersey and Delaware have issued novel orders to address the impact of the virus on certain debtors. Last month, debtors in the chapter 11 bankruptcy cases of Modell’s Sporting Goods, Inc. and CraftWorks Parent, LLC each sought and obtained court orders suspending certain case activity which, for all intents and purposes “mothballed” the cases for a certain period of time.

The economic impact of the COVID-19 coronavirus remains uncertain, but many are preparing for an up-tick in bankruptcies and, in particular, 363 transactions – sales of assets pursuant to Section 363 of the US Bankruptcy Code. Here are some practical steps that can help you prepare for your own 363 process and finding your stalking horse.